Separation of control and cash flow rights, ultimate controlling shareholders’ equity pledge ratio and risk of control transfer--evidence from Chinese A-share listed companies

ABSTRACT

Listed companies with a higher separation of two rights have less risk of control transfer of the ultimate controlling shareholder. The ultimate controlling shareholder’s equity pledge ratio plays a remarkable mediating role in this process. At different pledge rates, the ultimate controlling shareholder’s equity pledge exhibits an ‘encroachment’ or ‘incentive’ effect on corporate governance, respectively, resulting in an inverted U-shaped relationship between equity pledge rate and the risk of control transfer. Company size has a heterogeneous effect on the risk of control transfer, while shareholding concentration has heterogeneous and single threshold impacts on this risk.

KEYWORDS:

• Ultimate controlling shareholder
• equity pledge
• separation of control and cash flow rights
• control transfer
• risk

JEL CLASSIFICATION:

• C33
• G32

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

² The coefficient of (Pledge×V/C)_i,t−1 is 0.024709, very minor and not significant, it indicates that Pledge_i,t−1 has a feeble moderating effect between (V/C)_i,t−1 and Call_i,t.

³ All the regression results in Tables 1, 2 of this paper use robust standard errors.

Additional information

Funding

This work was supported by the [National Social Science Foundation of China] under Grant [No. 20XGL003].