Share Pledging in China: Funding Listed Firms or Funding Entrepreneurship? / Zhiguo He, Bibo Liu, Feifei Zhu.

Format:

Book

Author/Creator:

He, Zhiguo.

Contributor:

National Bureau of Economic Research.

Liu, Bibo.

Zhu, Feifei.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29731.

NBER working paper series no. w29731

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

This paper studies the connection between share pledging and entrepreneurial activities in China, challenging the common wisdom that share pledging funds circle back to the listed firms. Share pledging funds are at the discretion of the shareholders who pledge their publicly traded shares, and survey evidence shows that a majority of the largest shareholders (67.3%) used pledging funds outside the listed firms. By linking firm registration data with share pledging data, we show a positive relation between shareholders' pledging transactions and entrepreneurial activities. Utilizing the launch of the exchange market in 2013 as a quasi-natural experiment that favors share pledging by natural person shareholders against that by legal entity shareholders, our difference-in-differences (DiD) analysis shows natural person shareholders increased their entrepreneurial activities significantly in response to the policy shock, relative to legal entity shareholders. In addition to various robustness checks, we also show that shareholders with better access to share pledging invest more heavily in industries with above-median growth potential.

Notes:

Print version record

February 2022.