# Controlling Shareholders’ Equity Pledge and Listed Companies’ Stock Repurchase

Authors: Zhaolin Wang
Journal: Discrete Dynamics in Nature and Society
 (2022)

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## Abstract

Based on the unbalanced panel data of China’s A-share listed companies from 2013 to 2021, this paper empirically examines the influence of controlling shareholders’ equity pledge on the listed companies’ stock repurchase. It is found that listed companies will stabilize the share price through stock repurchase to prevent the risk of control right transfer due to stock price decline. There is a positive correlation between equity pledge and stock repurchase. Moreover, this positive correlation is more significant among nonstate-owned listed companies and listed companies in the eastern region. Further research shows that the positive influence of equity pledge on stock repurchase is more significant under a good information environment and good corporate governance. However, the earnings management behavior of listed companies has no significant influence on the positive influence of equity pledge on stock repurchase.


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## Body

## 1. Introduction and Literature Review

The essence of equity pledge is the pledge of the rights to the underlying loan. The target of the pledge is the stocks held by the pledgor, and the pledgor is generally the borrower. Equity pledge is not a new product of the capital market. China’s pledge guarantee system can be traced back to the Guarantee Law of the People’s Republic of China, which came into effect on October 1, 1995. Article 75 of the Guarantee Law stipulates stocks that can be transferred by law, and it is a right to pledge. Article 223 of the Property Law of the People’s Republic of China also stipulates that transferable stocks that the debtor or a third party has the right to dispose of can be pledged. The Guarantee Law and Property Law are the fundamental laws to be observed in equity pledge.The specific practices of equity pledge in China indicate that regulators are gradually relaxing the constraints of equity pledge to better serve the development of the capital market [1]. Before 2013, the equity pledge in China was mainly handled through intermediaries such as commercial banks and trusts. As equity pledge is a nonstandard business, the setting of contract terms is quite flexible, which is determined by the pledgor and the pledgee through negotiation. If a securities company pledges its stocks or certificates of securities investment funds, it needs to be more detailed. Along with the generally active capital market, on-floor equity pledge, a convenient financing tool, is widely favored by brokers and shareholders of listed companies. During this period, the scale of equity pledge market also expanded dramatically. However, with the sharp fluctuations in the capital market and frequent equity pledge plunge, the risk of equity pledge has become increasingly prominent. Thus, regulators had to focus on controlling the risk of on-floor pledge. On September 8, 2017, Shanghai Stock Exchange, Shenzhen Stock Exchange, and CSDC issued the Measures for the Trading, Registration and Settlement of Equity Pledge and Repurchase (2017 Amendment for Trial Implementation) to solicit public opinions on the amendments. The SASAC also issued the Guidelines on Risk Management of Equity Pledge and Repurchase Transactions by Securities Companies (Draft for Public Comments) on the same day. On March 12, 2018, the revised version of the above Methods and Guidelines was officially implemented. This new regulation puts forward stricter and more detailed requirements for the risk control of on-floor pledge.Since the formal promulgation of the Guarantee Law in 1995, equity pledge has been institutionally recognized for the first time. Existing studies have demonstrated that the controlling shareholders will choose to pledge equity when the stock price is overvalued, but the stock price will not remain high all the time, and the wrong pricing will be closer to the true value. However, the equity pledge itself has a negative effect on the stock price of listed companies. During the duration of the pledge contract, listed companies may also have some incidents that have negative impacts on the stock price [2, 3]. As a result, the stock price may also have a downward tendency. However, controlling shareholders fear the decline in the stock price, which may cause the transfer of control rights and the collapse of the stock price. However, this is not what controlling shareholders expect. Therefore, the significance of maintaining the stock price stability for controlling shareholders is evident [4].China actively promotes the construction of a multilevel capital market to drive sustained and healthy economic development. A key of this construction is to make the financiers with different risk levels and the fund providers with different risk tolerance and preference levels match quickly, that is, find risk-matched counterparties and complete transactions efficiently. The equity pledge market is a part of multilevel capital market, which was dominated by commercial banks before 2013 (with a market share of 80% in 2007). In May 2013, Shenzhen Stock Exchange issued the Measures for the Trading, Registration and Settlement of Equity Pledge and Repurchase (Trial). Thus, brokers gradually became the main body of the market (with a market share of 70% in 2018). They have significantly stimulated the development of this market because their transactions of equity pledge are more convenient than commercial banks. Although the stocks of listed companies as pledge objects are more liquid than fixed assets, the stocks of many listed companies are riskier than fixed assets [5]. Recently, large fluctuations in the capital market have led to a more frequent stock pledge plunge. This has caused many pledgors to suffer losses and provided a large amount of provision for diminution in value. Moreover, whether the pledge risk matching represents the equilibrium of China’s stock pledge market is particularly important because the major risk mismatch between the pledgor and the pledgee will damage the sustainability and stability of the market and lead to systemic financial risks [6].To maintain the stability of stock prices, regulators have issued a large number of policies to prevent systemic financial risks caused by equity pledge. The New Pledge Regulations promulgated in March 2018 further restricted the upper limit of equity pledge ratio and strictly controlled the use of funds [7]. However, the development of equity pledge business grows vigorously. Meanwhile, the research and exploration of equity pledge in domestic academic circles are making robust progress. Although fruitful research results have been achieved, it is urgent to strengthen the analysis of the influencing factors and economic consequences of equity pledge academically, which is of essential reference and exploration value for listed companies, investors, and regulators.Although equity pledge provides financing convenience for controlling shareholders by using the liquidity and valuation convenience of listed companies’ stocks, the pledgor cannot effectively monitor the actual use of funds obtained from the controlling shareholders’ equity pledge. For stock repurchase, the United States has carried out many studies, forming a wealth of research results, but there are not many related studies in domestic academic circles. Based on the political, economic, and institutional differences, it is also of great significance to study the stock repurchase in China. Song et al. [8] empirically studied the impact of equity pledge on stock repurchase and found that listed companies have the motivation to publish their stock repurchase plans and provide support for stock prices in order to alleviate the financial pressure caused by equity pledge and maintain control right [9]. The market will have a positive reaction to the stock repurchase plans, but the excess return on stock repurchase with equity pledge is lower than the excess return without pledge [10]. The actual purpose of controlling shareholders’ equity pledge is to alleviate their own financial difficulties, cash out, or increase the leverage of control rights. The willingness of large shareholders to pledge stocks is positively correlated with the wrong pricing of the company’s stocks and the credit policy, indicating the existence of temporal behavior of large shareholders’ equity pledge [11]. When pledging stocks, controlling shareholders can maintain or defend the stock price in various ways by themselves or by asking the listed company to reduce the risk of control right transfer. These methods may include reducing the levy on them, promoting listed companies to capitalize development costs or manage actual earnings to boost profits, using the dividend policy of listed companies to manage market value, requiring listed companies to conceal bad news, promoting listed companies to engage in tax avoidance, inhibiting innovative investment of listed companies, and increasing strategic charitable donations of listed companies [12].Different from Song et al. [8], this study employs the actual data of stock repurchase to study the relationship between equity pledge and stock repurchase. The reason for choosing the actual data of stock repurchase is that listed companies are not required to make repurchases as planned after the stock repurchase plan is issued, and listed companies can choose to either repurchase, partially repurchase, or not repurchase. In the United States, the entire process from the issuance of a stock repurchase plan to the completion of its implementation can take up to three years [13]. In the market, there are many cases of not repurchasing after issuing the stock plan. Studies have found that the average repurchase completion rate of US listed companies is nearly 73%. Only 60% of listed companies complete their stock repurchase plan in full, and another 10% complete less than 5% of their stock repurchase plan. The completion rate of Japan’s stock repurchase plan is higher than that of the United States, reaching 77% [14, 15]. It is found that the stock repurchase plan in the US market is used as a tool to raise the stock price, but the listed companies are not aware of it. In history, there has never been a record of punishment for listed companies not repurchasing after issuing the stock repurchase plan. In this case, investors may feel cheated and believe that the stock repurchase announcement is not credible. According to the signal theory, paying a high price is an effective signal because it is the only way to effectively distinguish those companies that are truly undervalued from others. However, when the stock repurchase is implemented, listed companies use free cash flow to buy stocks, which has a high cost for listed companies with financing constraints. Therefore, the implementation of stock repurchase is a more effective signal than the announcement of stock repurchase.To sum up, it can be seen that existing studies are still insufficient and fail to expose the relationship and internal influence mechanism between equity pledge and stock repurchase from the perspective of stock repurchase plan implementation. Therefore, based on the sample data of China’s A-share listed companies from 2013 to 2021, this paper profoundly discusses the relationship and internal mechanism between equity pledge and stock repurchase from the perspective of stock repurchase plan implementation. The innovations of this paper are as follows. First, proceeding from the actual repurchase behavior of listed companies, this paper finds that one of the motives of stock repurchase is equity pledge, which enriches the related literature on stock repurchase. Secondly, this paper also investigates what kind of changes the dividend policy of stock repurchase will have in equity pledge, which supplements the related literature on dividend policy of equity pledge.


## 2. Theoretical Analysis and Hypothesis

As mentioned earlier, brokers have been allowed to enter the equity pledge market of listed companies since May 2013. Subsequently, China’s stock pledge market has developed rapidly. Pledgors have made equity ledge to obtain funds from pledgees through off-floor pledge and on-floor pledge, respectively, and pledged the stocks of listed companies they held.Controlling shareholders’ equity pledge is an act in which the controlling shareholders of listed companies guarantee their stocks of listed companies as the collateral for obtaining funds for themselves or others. Equity pledge provides a convenient and fast financing mode for the controlling shareholders who are short of funds. Creditors are usually willing to lend to borrowers with equity pledge as guarantees because stocks are the expression of the ownership of listed companies. When listed companies go bankrupt, they also mean the claim of surplus value. Moreover, the stock price is clearly visible, making it easier for creditors to make the valuation [16].However, equity pledge is not without risks. Creditors will stipulate the warning line and liquidation line in the pledge contract for their own interests and guarantee the safety of funds. If the market value of the pledge is lower than the warning line, the borrower should supplement the pledge. If the market value is lower than the liquidation line, the pledged stock may be forced to liquidate through either block trade or competitive bidding [17]. Forced liquidation will lead to a downward spiral of stock prices, resulting in more stocks of controlling shareholders being sold. When a certain number of stocks are sold and the remaining stocks of the controlling shareholders can no longer control the listed company, the risk of control right transfer will occur [18]. For controlling shareholders, the control right is of high value. Therefore, it becomes the choice of controlling shareholders to maintain the control right and reduce the risk of control right transfer.Studies have found many ways for listed companies with equity pledge to maintain stock prices, and the shareholders will increase their holdings to convey positive information about the company to the market [19]. In the meantime, they will also use their own control right to change the information disclosure behavior of listed companies [20]. It is also found that listed companies also beautify accounting statements by earnings management, especially the upward earnings management [21, 22]. However, as a way of market value management, both short-term and long-term stock repurchase can play a role in increasing market value. This is because stock repurchase can not only improve the above-mentioned companies’ net profit per share but also increase the market demand for stocks as a kind of buying behavior, thus managing the supply value [23]. Furthermore, when the stock price is undervalued, stock repurchase also has a signal effect [24].Therefore, the controlling shareholders of equity pledge have the incentive to repurchase stocks for market value management. The controlling shareholders have the will to manage market value and also the ability to manage market value. In addition, the market value management is to enhance the market value of listed companies, and the management team can obtain the recognition of their management ability from the high market value of listed companies and enhance the management reputation, which is consistent with the management team’s goal. To sum up, this paper puts forward hypothesis 1.H1 : With other things being equal, controlling shareholders’ equity pledge is positively correlated with the listed companies’ stock repurchase.


## 3. Research Design

### 3.1. Sample Selection and Data Sources

This paper selects the sample data of China’s A-share listed companies from 2013 to 2021. It should be noted that the reason why the starting point of the sample is 2013 is as follows. First, before 2013, listed companies rarely conducted stock repurchase. Second, in 2013, the on-floor equity pledge was released, and securities companies were allowed by regulators to participate in the stock pledge business as fund providers. In addition, this paper excludes the ST-rated samples, insolvent samples, samples belonging to the financial industry, and samples with missing data. Finally, 15,567 companies of 3,331 listed companies are obtained, and the annual observation values constitute the unbalanced panel data. All the data in this paper are from the CSMAR Economic and Financial Database. At the same time, all continuous variables are winsorized at 1% and 99% quantiles to eliminate the influence of extreme outliers on the research results.


### 3.2. Variable Explanation and Description

#### 3.2.1. Explained Variable: Stock Repurchase

This paper selects the actual stock repurchase data of listed companies as the explained variable. The reason for choosing the actual implementation data of stock repurchase instead of the stock repurchase plan published is that listed companies do not need to carry out stock repurchase according to the original plan after the stock repurchase plan is published but have different choices. Moreover, the practice of listed companies’ repurchase is unknown. The implementation of stock repurchase is that listed companies use free cash flow to buy stocks. Therefore, the explained variables in this paper are, respectively, the dummy variable of stock repurchase (Rpurchase1) and the stock repurchase scale (Rpurchase2). If the listed company implements the stock repurchase in the year, Rpurchase1 is 1; otherwise, it takes 0. The stock repurchase scale (Rpurchase2) is calculated by the annual stock repurchase amount/market value of listed companies∗100%. The larger the value, the larger the stock repurchase scale of the company.


#### 3.2.2. Core Explanatory Variable: Controlling Shareholders’ Equity Pledge

This paper uses two methods to measure controlling shareholders’ equity pledge: (1) The dummy variable of controlling shareholders’ equity pledge (Pledge1). If the listed company has the equity pledge at the end of the accounting year, it is 1; otherwise, it is 0. (2) Year-end pledge ratio of controlling shareholders (Pledge2), which is calculated by the year-end number of stocks pledged by controlling shareholders of listed companies/the number of stocks held by controlling shareholders.


### 3.3. Control Variable

Considering the factors affecting the listed companies’ stock repurchase, the following control variables are selected to effectively restrain the influence of possible factors by referring to the existing literature. The control variables include company size (size), financial leverage (Lev), return on equity (Roe), growth (Growth), cash ratio (Cash), board independence (board), 1 person serving 2 positions (dual), and equity nature (Soe). In addition, this paper also controls the dummy variable of year, Year, and the dummy variable of industry, Industry, respectively. See Table1 for the definition and detailed description of the above variables.Table 1
Variable description.
VariableDefinitionSymbolDescriptionExplained variableDummy variable of stock repurchaseRpurchase1If the company implements the stock repurchase in the year, Rpurchase1 is 1; otherwise, it is 0Stock repurchase scaleRpurchase2Annual stock repurchase amount/market value of listed companies∗100%Core explanatory variableDummy variable of controlling shareholders equity pledgePledge1If the company has equity pledge at the end of the accounting year, it is 1; otherwise, it is 0Year-end pledge ratio of controlling shareholdersPledge2Year-end number of stocks pledged by controlling shareholders of listed companies/the number of stocks held by controlling shareholdersControl variableCompany sizeSizeYear-end total assets; take the natural logarithmFinancial leverageLevTotal liabilities/total assetsReturn on equityRoeNet profit/equityGrowthGrowthGrowth rate of business revenue compared with the previous periodCash ratioCashCash/total assetsBoard independenceBoardNumber of independent directors/board size1 person serving 2 positionsDualIf the chairman and general manager hold concurrent positions, the value is 1; otherwise, it is 0Nature of equitySoeIf the listed company is a state-owned enterprise, the value is 1; otherwise, it is 0


### 3.4. Model Setting

To test hypothesis H1, that is, the influence of controlling shareholders’ equity pledge on listed companies’ stock repurchase, this paper sets the following regression model:(1)Rpurchasei,t+1=α0+α1Pledgei,t+α2Controlsi,t+∑Year+∑Industry+εi,t.To effectively reduce the influence of endogenous factors, the core explanatory variables and control variables in this paper are treated with one-period lag, and the repurchase is conducted.


## 3.1. Sample Selection and Data Sources

This paper selects the sample data of China’s A-share listed companies from 2013 to 2021. It should be noted that the reason why the starting point of the sample is 2013 is as follows. First, before 2013, listed companies rarely conducted stock repurchase. Second, in 2013, the on-floor equity pledge was released, and securities companies were allowed by regulators to participate in the stock pledge business as fund providers. In addition, this paper excludes the ST-rated samples, insolvent samples, samples belonging to the financial industry, and samples with missing data. Finally, 15,567 companies of 3,331 listed companies are obtained, and the annual observation values constitute the unbalanced panel data. All the data in this paper are from the CSMAR Economic and Financial Database. At the same time, all continuous variables are winsorized at 1% and 99% quantiles to eliminate the influence of extreme outliers on the research results.


## 3.2. Variable Explanation and Description

### 3.2.1. Explained Variable: Stock Repurchase

This paper selects the actual stock repurchase data of listed companies as the explained variable. The reason for choosing the actual implementation data of stock repurchase instead of the stock repurchase plan published is that listed companies do not need to carry out stock repurchase according to the original plan after the stock repurchase plan is published but have different choices. Moreover, the practice of listed companies’ repurchase is unknown. The implementation of stock repurchase is that listed companies use free cash flow to buy stocks. Therefore, the explained variables in this paper are, respectively, the dummy variable of stock repurchase (Rpurchase1) and the stock repurchase scale (Rpurchase2). If the listed company implements the stock repurchase in the year, Rpurchase1 is 1; otherwise, it takes 0. The stock repurchase scale (Rpurchase2) is calculated by the annual stock repurchase amount/market value of listed companies∗100%. The larger the value, the larger the stock repurchase scale of the company.


### 3.2.2. Core Explanatory Variable: Controlling Shareholders’ Equity Pledge

This paper uses two methods to measure controlling shareholders’ equity pledge: (1) The dummy variable of controlling shareholders’ equity pledge (Pledge1). If the listed company has the equity pledge at the end of the accounting year, it is 1; otherwise, it is 0. (2) Year-end pledge ratio of controlling shareholders (Pledge2), which is calculated by the year-end number of stocks pledged by controlling shareholders of listed companies/the number of stocks held by controlling shareholders.


## 3.2.1. Explained Variable: Stock Repurchase

This paper selects the actual stock repurchase data of listed companies as the explained variable. The reason for choosing the actual implementation data of stock repurchase instead of the stock repurchase plan published is that listed companies do not need to carry out stock repurchase according to the original plan after the stock repurchase plan is published but have different choices. Moreover, the practice of listed companies’ repurchase is unknown. The implementation of stock repurchase is that listed companies use free cash flow to buy stocks. Therefore, the explained variables in this paper are, respectively, the dummy variable of stock repurchase (Rpurchase1) and the stock repurchase scale (Rpurchase2). If the listed company implements the stock repurchase in the year, Rpurchase1 is 1; otherwise, it takes 0. The stock repurchase scale (Rpurchase2) is calculated by the annual stock repurchase amount/market value of listed companies∗100%. The larger the value, the larger the stock repurchase scale of the company.


## 3.2.2. Core Explanatory Variable: Controlling Shareholders’ Equity Pledge

This paper uses two methods to measure controlling shareholders’ equity pledge: (1) The dummy variable of controlling shareholders’ equity pledge (Pledge1). If the listed company has the equity pledge at the end of the accounting year, it is 1; otherwise, it is 0. (2) Year-end pledge ratio of controlling shareholders (Pledge2), which is calculated by the year-end number of stocks pledged by controlling shareholders of listed companies/the number of stocks held by controlling shareholders.


## 3.3. Control Variable

Considering the factors affecting the listed companies’ stock repurchase, the following control variables are selected to effectively restrain the influence of possible factors by referring to the existing literature. The control variables include company size (size), financial leverage (Lev), return on equity (Roe), growth (Growth), cash ratio (Cash), board independence (board), 1 person serving 2 positions (dual), and equity nature (Soe). In addition, this paper also controls the dummy variable of year, Year, and the dummy variable of industry, Industry, respectively. See Table1 for the definition and detailed description of the above variables.Table 1
Variable description.
VariableDefinitionSymbolDescriptionExplained variableDummy variable of stock repurchaseRpurchase1If the company implements the stock repurchase in the year, Rpurchase1 is 1; otherwise, it is 0Stock repurchase scaleRpurchase2Annual stock repurchase amount/market value of listed companies∗100%Core explanatory variableDummy variable of controlling shareholders equity pledgePledge1If the company has equity pledge at the end of the accounting year, it is 1; otherwise, it is 0Year-end pledge ratio of controlling shareholdersPledge2Year-end number of stocks pledged by controlling shareholders of listed companies/the number of stocks held by controlling shareholdersControl variableCompany sizeSizeYear-end total assets; take the natural logarithmFinancial leverageLevTotal liabilities/total assetsReturn on equityRoeNet profit/equityGrowthGrowthGrowth rate of business revenue compared with the previous periodCash ratioCashCash/total assetsBoard independenceBoardNumber of independent directors/board size1 person serving 2 positionsDualIf the chairman and general manager hold concurrent positions, the value is 1; otherwise, it is 0Nature of equitySoeIf the listed company is a state-owned enterprise, the value is 1; otherwise, it is 0


## 3.4. Model Setting

To test hypothesis H1, that is, the influence of controlling shareholders’ equity pledge on listed companies’ stock repurchase, this paper sets the following regression model:(1)Rpurchasei,t+1=α0+α1Pledgei,t+α2Controlsi,t+∑Year+∑Industry+εi,t.To effectively reduce the influence of endogenous factors, the core explanatory variables and control variables in this paper are treated with one-period lag, and the repurchase is conducted.


## 4. Analysis of Empirical Results

### 4.1. Descriptive Statistical Analysis

Table2 shows the results of descriptive statistical analysis. From the explained variables, the average value of Rpurchase1 is 0.185, which indicates that 18.5% of listed companies repurchase stocks during the sample period. The average value of Rpurchase2 is 0.458, which indicates that listed companies repurchase 45.8% of the market value. The minimum value is 0, and the maximum value is 15.27, which indicates that there is a huge gap between different listed companies in the stock repurchase scale. From the core explanatory variables, the average value of Pledge1 is 0.528, which indicates that 52.8% of the controlling shareholders participate in the equity pledge business during the sample period. The average value of Pledge2 is 0.499, which indicates that 49.9% of controlling shareholders carry out the equity pledge. The minimum value is 0, and the maximum value is 16.25, which indicates that the ratio of controlling shareholders’ equity pledge in different listed companies varies largely in different years. From the control variables, the difference is also significant. In addition, multicollinearity tests are carried out in this paper, and the average VIF is 5.69, suggesting that there is no significant collinearity problem in the samples.Table 2
Descriptive statistics.
VariableNMeanSdminp25p50p75MaxRpurchase1155670.1850.38800001Rpurchase2155670.4581.426000015.27Pledge1155670.5280.49900111Pledge2155670.4990.243001816.25Lev155670.4280.1980.06030.2690.4220.5780.863Growth155590.3800.881−0.674−0.01130.1530.4525.987Roe155550.07330.102−0.4910.03850.07750.1210.306Soe152330.3470.47600011Dual155670.2800.44900011Board1556637.605.39833.3333.3336.3642.8657.14Asset1556722.531.31720.2021.5922.3323.2926.50


### 4.2. Correlation Analysis

Table3 presents the statistical results of correlation analysis. From the dummy variable of controlling shareholders’ equity pledge, the correlation coefficient between Rpurchase1 and Pledge1 is 0.221, which is significantly positive at the level of 1%. It indicates that whether the controlling shareholders’ equity is pledged is positively correlated with whether the stock repurchase is carried out. Meanwhile, the correlation coefficient between Rpurchase1 and Pledge2 is 0.152, which is significantly positive at the level of 1%. It indicates that the ratio of controlling shareholders’ equity pledge is positively correlated with whether the stock repurchase is carried out. From the ratio of controlling shareholders’ equity pledge, the correlation coefficient between Rpurchase1 and Pledge2 is 0.186, which is significantly positive at the level of 1%. It indicates that the ratio of controlling shareholders’ equity pledge is positively correlated with whether the stock repurchase is carried out. Moreover, the correlation coefficient between Rpurchase2 and Pledge2 is 0.134, which is significantly positive at the level of 1%. It indicates that the ratio of controlling shareholders’ equity pledge is positively correlated with the ratio of stock repurchase. The above results basically verify the validity of hypothesis 1, which needs to be further tested and demonstrated.Table 3
Correlation analysis.
VariableRpurchase1Rpurchase2Pledge1Pledge2LevGrowthRoeRpurchase11Rpurchase20.674∗∗∗1Pledge10.221∗∗∗0.152∗∗∗1Pledge20.186∗∗∗0.134∗∗∗0.495∗∗∗1Lev−0.063∗∗∗−0.036∗∗∗−0.040∗∗∗0.025∗∗∗1Growth−0.023∗∗∗−0.031∗∗∗0.006000.01100.094∗∗∗1Roe0.029∗∗∗0.024∗∗∗−0.045∗∗∗−0.068∗∗∗−0.137∗∗∗0.032∗∗∗1Soe−0.232∗∗∗−0.150∗∗∗−0.483∗∗∗−0.307∗∗∗0.279∗∗∗0.036∗∗∗−0.047∗∗∗Dual0.082∗∗∗0.046∗∗∗0.155∗∗∗0.089∗∗∗−0.129∗∗∗−0.017∗∗0.0120Board0.020∗∗0.004000.027∗∗∗0.020∗∗0.001000.017∗∗−0.0110Asset−0.008000.038∗∗∗−0.155∗∗∗−0.01100.575∗∗∗0.026∗∗∗0.072∗∗∗SoeDualBoardAssetSoe1Dual−0.299∗∗∗1Board−0.045∗∗∗0.118∗∗∗1Asset0.417∗∗∗−0.200∗∗∗0.016∗∗1


### 4.3. Analysis of Multiple Regression Results

Will the listed companies whose controlling shareholders pledge their stocks manage their market value in the way of stock repurchase? In order to verify the prediction of hypothesis 1, this paper carries out empirical tests, and the specific results are demonstrated in Table4.Table 4
Results of baseline regression.
Panel A core explained variable: dummy variable of equity pledgeVariable(1)(2)(3)(4)Rpurchase1Rpurchase1Rpurchase2Rpurchase2Pledge10.1464∗∗∗0.0603∗∗∗0.3688∗∗∗0.1001∗∗∗(16.607)(6.678)(11.196)(3.040)Lev−0.0538−0.4159∗∗(−1.231)(−2.560)Growth0.0128∗∗∗0.0603∗∗∗(3.280)(4.226)Roe0.1687∗∗∗0.4439∗∗∗(4.170)(2.985)Soe−0.00390.1068(−0.114)(0.797)Dual−0.0183−0.0476(−1.289)(−0.971)Board−0.0007−0.0002(−0.685)(−0.069)Asset0.2009∗∗∗0.6259∗∗∗(20.175)(18.279)Constant0.1075∗∗∗−4.3050∗∗∗0.2631∗∗∗−13.4894∗∗∗(23.113)(−19.538)(15.138)(−17.906)YearYYYYIndustryYYYYObservations15567152121556715212R-squared0.0230.0880.0090.048F275.890.39125.457.54Panel B core explained variable: equity pledge ratioPledge20.0062∗∗∗0.0026∗∗∗0.0190∗∗∗0.0086∗∗∗(10.651)(5.237)(9.131)(4.639)Lev−0.05180.4010∗∗(−1.190)(−2.479)Growth0.0117∗∗∗0.0568∗∗∗(2.974)(−3.969)Roe0.1591∗∗∗0.3944∗∗∗(3.926)(2.684)Soe−0.00350.1185(−0.099)(0.874)Dual−0.0196−0.0485(−1.367)(−0.987)Board−0.0007−0.0004(−0.738)(−0.108)Asset0.1985∗∗∗0.5915∗∗∗(19.979)(17.149)Constant0.1446∗∗∗−4.2367∗∗∗0.3339∗∗∗−12.7276∗∗∗(38.365)(−19.171)(24.625)(−16.726)YearYYYYIndustryYYYYObservations15567152121556715212R-squared0.0270.0890.0160.051F113.578.6783.3756.53Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.Panel A presents the regression results when the core explanatory variable is the dummy variable of equity pledge. The explained variable in column (1) and column (2) is the dummy variable of stock repurchase. From column (1), it can be seen that the regression coefficient of Pledge1 is 0.1464, which is significantly positive at the level of 1%. Column (2) is the regression result after adding control variables. The regression coefficient of Pledge1 is 0.0603, which is significantly positive at the level of 1%. This shows that the average annual listed companies’ stock repurchase with controlling shareholders’ equity pledge is 6.03% higher than that of listed companies without controlling shareholders’ equity pledge. Column (3) and column (4) are the regression results that the explained variable is the stock repurchase ratio. The results in column (3) indicate that equity pledge increases the stock repurchase ratio. From the results of column (4) after adding control variables, it can be seen that the ratio of stock repurchase amount of listed companies with controlling shareholders’ equity pledge to market value is significantly higher than that of listed companies without equity pledge. In short, listed companies with equity pledge will increase the stock repurchase ratio in the next year, which is consistent with the expectation of hypothesis 1.Panel B introduces the regression results when the core explanatory variable is the ratio of equity pledge. Column (5) and column (7) are regression results without adding control variables. The explained variable of column (5) and column (6) is the dummy variable of stock repurchase. The explained variable of column (7) and column (8) is the stock repurchase ratio. It can be seen from column (6) that the regression coefficient of Pledge2 is 0.0026, which is significantly positive at the level of 1%, indicating that there is a positive correlation between the ratio of controlling shareholders’ equity pledge and whether the stock repurchase is carried out. The regression coefficient of Pledge2 in column (8) is 0.0086, which is significantly positive at the level of 1%, indicating that there is a positive correlation between the ratio of controlling shareholders’ equity pledge and the ratio of listed companies’ stock repurchase. Thus, hypothesis 1 is verified.From the perspective of control variables, company size, return on equity, and growth have a significant positive correlation with stock repurchase, while financial leverage has a significant negative correlation with stock repurchase.


## 4.1. Descriptive Statistical Analysis

Table2 shows the results of descriptive statistical analysis. From the explained variables, the average value of Rpurchase1 is 0.185, which indicates that 18.5% of listed companies repurchase stocks during the sample period. The average value of Rpurchase2 is 0.458, which indicates that listed companies repurchase 45.8% of the market value. The minimum value is 0, and the maximum value is 15.27, which indicates that there is a huge gap between different listed companies in the stock repurchase scale. From the core explanatory variables, the average value of Pledge1 is 0.528, which indicates that 52.8% of the controlling shareholders participate in the equity pledge business during the sample period. The average value of Pledge2 is 0.499, which indicates that 49.9% of controlling shareholders carry out the equity pledge. The minimum value is 0, and the maximum value is 16.25, which indicates that the ratio of controlling shareholders’ equity pledge in different listed companies varies largely in different years. From the control variables, the difference is also significant. In addition, multicollinearity tests are carried out in this paper, and the average VIF is 5.69, suggesting that there is no significant collinearity problem in the samples.Table 2
Descriptive statistics.
VariableNMeanSdminp25p50p75MaxRpurchase1155670.1850.38800001Rpurchase2155670.4581.426000015.27Pledge1155670.5280.49900111Pledge2155670.4990.243001816.25Lev155670.4280.1980.06030.2690.4220.5780.863Growth155590.3800.881−0.674−0.01130.1530.4525.987Roe155550.07330.102−0.4910.03850.07750.1210.306Soe152330.3470.47600011Dual155670.2800.44900011Board1556637.605.39833.3333.3336.3642.8657.14Asset1556722.531.31720.2021.5922.3323.2926.50


## 4.2. Correlation Analysis

Table3 presents the statistical results of correlation analysis. From the dummy variable of controlling shareholders’ equity pledge, the correlation coefficient between Rpurchase1 and Pledge1 is 0.221, which is significantly positive at the level of 1%. It indicates that whether the controlling shareholders’ equity is pledged is positively correlated with whether the stock repurchase is carried out. Meanwhile, the correlation coefficient between Rpurchase1 and Pledge2 is 0.152, which is significantly positive at the level of 1%. It indicates that the ratio of controlling shareholders’ equity pledge is positively correlated with whether the stock repurchase is carried out. From the ratio of controlling shareholders’ equity pledge, the correlation coefficient between Rpurchase1 and Pledge2 is 0.186, which is significantly positive at the level of 1%. It indicates that the ratio of controlling shareholders’ equity pledge is positively correlated with whether the stock repurchase is carried out. Moreover, the correlation coefficient between Rpurchase2 and Pledge2 is 0.134, which is significantly positive at the level of 1%. It indicates that the ratio of controlling shareholders’ equity pledge is positively correlated with the ratio of stock repurchase. The above results basically verify the validity of hypothesis 1, which needs to be further tested and demonstrated.Table 3
Correlation analysis.
VariableRpurchase1Rpurchase2Pledge1Pledge2LevGrowthRoeRpurchase11Rpurchase20.674∗∗∗1Pledge10.221∗∗∗0.152∗∗∗1Pledge20.186∗∗∗0.134∗∗∗0.495∗∗∗1Lev−0.063∗∗∗−0.036∗∗∗−0.040∗∗∗0.025∗∗∗1Growth−0.023∗∗∗−0.031∗∗∗0.006000.01100.094∗∗∗1Roe0.029∗∗∗0.024∗∗∗−0.045∗∗∗−0.068∗∗∗−0.137∗∗∗0.032∗∗∗1Soe−0.232∗∗∗−0.150∗∗∗−0.483∗∗∗−0.307∗∗∗0.279∗∗∗0.036∗∗∗−0.047∗∗∗Dual0.082∗∗∗0.046∗∗∗0.155∗∗∗0.089∗∗∗−0.129∗∗∗−0.017∗∗0.0120Board0.020∗∗0.004000.027∗∗∗0.020∗∗0.001000.017∗∗−0.0110Asset−0.008000.038∗∗∗−0.155∗∗∗−0.01100.575∗∗∗0.026∗∗∗0.072∗∗∗SoeDualBoardAssetSoe1Dual−0.299∗∗∗1Board−0.045∗∗∗0.118∗∗∗1Asset0.417∗∗∗−0.200∗∗∗0.016∗∗1


## 4.3. Analysis of Multiple Regression Results

Will the listed companies whose controlling shareholders pledge their stocks manage their market value in the way of stock repurchase? In order to verify the prediction of hypothesis 1, this paper carries out empirical tests, and the specific results are demonstrated in Table4.Table 4
Results of baseline regression.
Panel A core explained variable: dummy variable of equity pledgeVariable(1)(2)(3)(4)Rpurchase1Rpurchase1Rpurchase2Rpurchase2Pledge10.1464∗∗∗0.0603∗∗∗0.3688∗∗∗0.1001∗∗∗(16.607)(6.678)(11.196)(3.040)Lev−0.0538−0.4159∗∗(−1.231)(−2.560)Growth0.0128∗∗∗0.0603∗∗∗(3.280)(4.226)Roe0.1687∗∗∗0.4439∗∗∗(4.170)(2.985)Soe−0.00390.1068(−0.114)(0.797)Dual−0.0183−0.0476(−1.289)(−0.971)Board−0.0007−0.0002(−0.685)(−0.069)Asset0.2009∗∗∗0.6259∗∗∗(20.175)(18.279)Constant0.1075∗∗∗−4.3050∗∗∗0.2631∗∗∗−13.4894∗∗∗(23.113)(−19.538)(15.138)(−17.906)YearYYYYIndustryYYYYObservations15567152121556715212R-squared0.0230.0880.0090.048F275.890.39125.457.54Panel B core explained variable: equity pledge ratioPledge20.0062∗∗∗0.0026∗∗∗0.0190∗∗∗0.0086∗∗∗(10.651)(5.237)(9.131)(4.639)Lev−0.05180.4010∗∗(−1.190)(−2.479)Growth0.0117∗∗∗0.0568∗∗∗(2.974)(−3.969)Roe0.1591∗∗∗0.3944∗∗∗(3.926)(2.684)Soe−0.00350.1185(−0.099)(0.874)Dual−0.0196−0.0485(−1.367)(−0.987)Board−0.0007−0.0004(−0.738)(−0.108)Asset0.1985∗∗∗0.5915∗∗∗(19.979)(17.149)Constant0.1446∗∗∗−4.2367∗∗∗0.3339∗∗∗−12.7276∗∗∗(38.365)(−19.171)(24.625)(−16.726)YearYYYYIndustryYYYYObservations15567152121556715212R-squared0.0270.0890.0160.051F113.578.6783.3756.53Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.Panel A presents the regression results when the core explanatory variable is the dummy variable of equity pledge. The explained variable in column (1) and column (2) is the dummy variable of stock repurchase. From column (1), it can be seen that the regression coefficient of Pledge1 is 0.1464, which is significantly positive at the level of 1%. Column (2) is the regression result after adding control variables. The regression coefficient of Pledge1 is 0.0603, which is significantly positive at the level of 1%. This shows that the average annual listed companies’ stock repurchase with controlling shareholders’ equity pledge is 6.03% higher than that of listed companies without controlling shareholders’ equity pledge. Column (3) and column (4) are the regression results that the explained variable is the stock repurchase ratio. The results in column (3) indicate that equity pledge increases the stock repurchase ratio. From the results of column (4) after adding control variables, it can be seen that the ratio of stock repurchase amount of listed companies with controlling shareholders’ equity pledge to market value is significantly higher than that of listed companies without equity pledge. In short, listed companies with equity pledge will increase the stock repurchase ratio in the next year, which is consistent with the expectation of hypothesis 1.Panel B introduces the regression results when the core explanatory variable is the ratio of equity pledge. Column (5) and column (7) are regression results without adding control variables. The explained variable of column (5) and column (6) is the dummy variable of stock repurchase. The explained variable of column (7) and column (8) is the stock repurchase ratio. It can be seen from column (6) that the regression coefficient of Pledge2 is 0.0026, which is significantly positive at the level of 1%, indicating that there is a positive correlation between the ratio of controlling shareholders’ equity pledge and whether the stock repurchase is carried out. The regression coefficient of Pledge2 in column (8) is 0.0086, which is significantly positive at the level of 1%, indicating that there is a positive correlation between the ratio of controlling shareholders’ equity pledge and the ratio of listed companies’ stock repurchase. Thus, hypothesis 1 is verified.From the perspective of control variables, company size, return on equity, and growth have a significant positive correlation with stock repurchase, while financial leverage has a significant negative correlation with stock repurchase.


## 5. Robustness Test

### 5.1. Propensity Score Matching

Propensity score matching is an effective method to alleviate systematic differences. According to the control variables in this paper, 1 : 1 matching is made on whether there is controlling shareholders’ equity pledge. The regression results after matching are shown in Table5. After the propensity score matching, both the dummy variable of equity pledge and the equity pledge ratio still have a significant positive impact on stock repurchase.Table 5
Regression results of propensity score matching.
Variable(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase1Rpurchase2Pledge10.1601∗∗∗0.2199∗∗∗(6.500)(2.964)Pledge20.1108∗∗∗0.1675∗∗∗(2.774)(4.066)Constant−3.9705∗∗∗−3.9444∗∗∗−12.7738∗∗∗−12.1484∗∗∗(−17.632)(−17.504)(−16.777)(−15.924)YearYYYYIndustryYYYYObservations15567152121556715212R-squared0.0770.0770.0430.045F59.9551.5440.8139.97Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.


### 5.2. Alternative Explanatory Variable and Explained Variable

First of all, the new proxy variable Pledge3 is adopted as the core explanatory variable, which is obtained by dividing the year-end pledge quantity by the total stock capital. The regression results are shown in column (1) and column (2) of Table6. It can be seen that Pledge3 has a significant positive influence on whether to carry out the stock repurchase.Table 6
Regression results of alternative explanatory variable and explained variable.
Variable(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase3Rpurchase3Pledge10.5951∗∗∗(17.270)Pledge20.5668∗∗∗(16.456)Pledge30.1868∗∗∗0.1863∗∗∗(18.369)(18.393)Constant−3.0108∗∗∗−3.0096∗∗−3.0609∗∗∗−3.0576∗∗∗(−2.774)(−2.468)(−4.154)(−3.919)YearYYYYIndustryYYYYObservations15567152121556715212R-squared0.0860.0870.0470.053F125.455.7483.3755.47Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.Secondly, Rpurchase3, the natural logarithm of the stock repurchase amount, is taken as the proxy variable of the new explained variable. It can be seen from Table6 that the regression coefficients of the dummy variable of equity pledge and equity pledge ratio to Rpurchase3 are 0.5951 and 0.5668, respectively, both of which are significantly positive at the level of 1%. The above results are consistent with the initial test results.


## 5.1. Propensity Score Matching

Propensity score matching is an effective method to alleviate systematic differences. According to the control variables in this paper, 1 : 1 matching is made on whether there is controlling shareholders’ equity pledge. The regression results after matching are shown in Table5. After the propensity score matching, both the dummy variable of equity pledge and the equity pledge ratio still have a significant positive impact on stock repurchase.Table 5
Regression results of propensity score matching.
Variable(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase1Rpurchase2Pledge10.1601∗∗∗0.2199∗∗∗(6.500)(2.964)Pledge20.1108∗∗∗0.1675∗∗∗(2.774)(4.066)Constant−3.9705∗∗∗−3.9444∗∗∗−12.7738∗∗∗−12.1484∗∗∗(−17.632)(−17.504)(−16.777)(−15.924)YearYYYYIndustryYYYYObservations15567152121556715212R-squared0.0770.0770.0430.045F59.9551.5440.8139.97Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.


## 5.2. Alternative Explanatory Variable and Explained Variable

First of all, the new proxy variable Pledge3 is adopted as the core explanatory variable, which is obtained by dividing the year-end pledge quantity by the total stock capital. The regression results are shown in column (1) and column (2) of Table6. It can be seen that Pledge3 has a significant positive influence on whether to carry out the stock repurchase.Table 6
Regression results of alternative explanatory variable and explained variable.
Variable(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase3Rpurchase3Pledge10.5951∗∗∗(17.270)Pledge20.5668∗∗∗(16.456)Pledge30.1868∗∗∗0.1863∗∗∗(18.369)(18.393)Constant−3.0108∗∗∗−3.0096∗∗−3.0609∗∗∗−3.0576∗∗∗(−2.774)(−2.468)(−4.154)(−3.919)YearYYYYIndustryYYYYObservations15567152121556715212R-squared0.0860.0870.0470.053F125.455.7483.3755.47Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.Secondly, Rpurchase3, the natural logarithm of the stock repurchase amount, is taken as the proxy variable of the new explained variable. It can be seen from Table6 that the regression coefficients of the dummy variable of equity pledge and equity pledge ratio to Rpurchase3 are 0.5951 and 0.5668, respectively, both of which are significantly positive at the level of 1%. The above results are consistent with the initial test results.


## 6. Further Analysis

### 6.1. Controlling Shareholders’ Equity Pledge and Listed Companies’ Stock Repurchase: The Motivation of Stock Price Rising

According to the previous hypothesis, equity pledge is that listed companies tend to adopt the market value management method of stock repurchase to raise the stock price. Therefore, it can be expected that when listed companies are faced with serious risk of control right transfer, the controlling shareholders will have a stronger motivation to boost the stock price through stock repurchase. Therefore, this paper further carries out heterogeneity analysis by group according to the equity nature and regional differences.


#### 6.1.1. Equity Nature, Controlling Shareholders’ Equity Pledge, and Listed Companies’ Stock Repurchase

According to the equity nature, this paper divides the samples into two groups of state-owned listed companies and nonstate-owned listed companies and carries out the regression by group. Table7 shows the results of regression by group.Table 7
Regression results of equity nature, controlling shareholders’ equity pledge, and listed companies’ stock repurchase.
Panel A core explained variable: dummy variable of equity pledgeVariableSoe = 1Soe = 0(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase1Rpurchase2Pledge10.00540.04330.0621∗∗∗0.0606∗∗∗(0.457)(0.984)(5.363)(3.409)Lev−0.1513∗∗∗−0.6337∗∗∗−0.0496−0.4267∗∗(−2.782)(−2.763)(−0.876)(−2.034)Growth−0.0107∗∗∗−0.0225∗−0.0083−0.0749∗∗∗(−3.187)(−1.745)(−1.321)(−3.280)Roe−0.0115−0.0741−0.2304∗∗∗−0.5836∗∗∗(−0.278)(−0.542)(−4.156)(−2.773)Dual0.02830.0565−0.0263−0.0568(1.451)(0.936)(−1.446)(−0.887)Board−0.00010.0014−0.0005−0.0001(−0.098)(0.359)(−0.346)(−0.016)Asset0.1000∗∗∗0.2752∗∗∗0.2403∗∗∗0.7619∗∗∗(7.697)(6.802)(18.542)(16.972)Constant−2.1888∗∗∗−5.9816∗∗∗−5.0450∗∗∗−16.0454∗∗∗(−7.327)(−6.429)(−17.741)(−16.541)YearYYYYIndustryYYYYObservations5,2745,2749,9389,938R-squared0.0340.0170.1070.059F10.017.80197.2358.45Panel B core explained variable: equity pledge ratioPledge20.0034∗∗0.0114∗0.0018∗∗∗0.0064∗∗∗(1.972)(1.851)(3.684)(3.317)Lev−0.1454∗∗∗−0.6190∗∗∗−0.0450−0.4004∗(−2.685)(−2.705)(−0.796)(−1.911)Growth−0.0104∗∗∗−0.0211−0.0074−0.0727∗∗∗(−3.108)(−1.644)(−1.168)(−3.175)Roe−0.0168−0.0913−0.2254∗∗∗−0.5252∗∗(−0.409)(−0.669)(−4.063)(−2.522)Dual0.02870.0572−0.0277−0.0566(1.463)(0.946)(−1.517)(−0.881)Board−0.00010.0014−0.0006−0.0004(−0.083)(0.371)(−0.402)(−0.076)Asset0.0974∗∗∗0.2692∗∗∗0.2429∗∗∗0.7212∗∗∗(7.644)(6.720)(18.884)(15.925)Constant−2.1338∗∗∗−5.8546∗∗∗−5.0746∗∗∗−15.1642∗∗∗(−7.286)(−6.358)(−17.807)(−15.370)YearYYYYIndustryYYYYObservations5,2745,2749,9389,938R-squared0.0380.0190.1060.060F10.157.85484.3358.01Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.The core explanatory variable of Panel A is the dummy variable of equity pledge. The regression results show that the regression coefficient andt value of column (3) are significantly larger than those of column (1), which indicates that whether there is an equity pledge in nonstate-owned listed companies has a significantly greater positive impact on the repurchase decision than state-owned listed companies. Moreover, the regression coefficient and t value of column (4) are significantly larger than those of column (2), which indicates that the stock repurchase scale of nonstate-owned listed companies with equity pledge is significantly larger than that of state-owned listed companies, which once again verifies the motivation of stock repurchase to boost stock price. The core explanatory variable of Panel B is the equity pledge ratio. From column (5) and column (7), it can be seen that the influence of state-owned listed companies’ equity pledge ratio on whether to carry out the stock repurchase is not particularly significant compared with that of nonstate-owned listed companies. However, it can be seen from column (8) that the regression coefficient and significance of the influence of the nonstate-owned listed companies’ equity pledge ratio on the stock repurchase scale are significantly higher than those of state-owned listed companies, which further verifies the motivation of stock repurchase.The reason is that the above-mentioned nonstate-owned companies tend to use stock repurchase to boost the stock price. This is because the nonstate-owned listed companies face a greater risk of control right transfer, while the pledge behavior of state-owned listed companies is strictly regulated. When the pledged stocks fall below the “liquidation line,” they cannot be forced to liquidate, which requires the approval of the regulators, thus restricting the transfer of state-owned stocks. In addition, the controlling shareholders of state-owned listed companies have strong social and political relationships, so they use political resources when the equity pledge crisis occurs.


#### 6.1.2. Regional Differences, Controlling Shareholders’ Equity Pledge, and Listed Companies’ Stock Repurchase

According to the provinces and municipalities where the listed companies are registered, this paper divides the samples into the eastern region group and the western region group and carries out tests by group to demonstrate the influence path of listed companies’ equity pledge on stock repurchase under different marketization levels. See Table8 for the test results by group.Table 8
Regression results of regional differences, controlling shareholders’ equity pledge, and listed companies’ stock repurchase.
Panel A core explained variable: dummy variable of equity pledgeVariableEast = 1East = 0(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase1Rpurchase2Pledge10.0691∗∗∗0.0818∗∗∗0.0383∗∗∗0.0375∗∗(6.057)(3.923)(2.782)(2.011)Lev−0.0476−0.4357∗∗−0.0710−0.3675(−0.863)(−2.157)(−1.070)(−1.366)Growth−0.0098∗∗−0.0510∗∗∗−0.0175∗∗∗−0.0749∗∗∗(−2.035)(−2.974)(−2.957)(−2.930)Roe−0.2215∗∗∗−0.6644∗∗∗−0.05310.0271(−4.261)(−3.294)(−0.884)(0.159)Soe0.00440.1770−0.0214−0.0592(0.106)(1.014)(−0.325)(−0.338)Dual−0.0175−0.0262−0.0167−0.0961(−1.064)(−0.482)(−0.593)(−0.874)Board−0.0004−0.0003−0.00130.0005(−0.341)(−0.077)(−0.820)(0.082)Asset0.2126∗∗∗0.6478∗∗∗0.1661∗∗∗0.5680∗∗∗(18.031)(16.537)(9.431)(8.077)Constant−4.5611∗∗∗−13.9197∗∗∗−3.5376∗∗∗−12.3249∗∗∗(−17.523)(−16.194)(−9.089)(−7.950)YearYYYYIndustryYYYYObservations10,89310,8934,3194,319R-squared0.0960.0510.0680.042F75.6348.9217.8111.62Panel B core explained variable: equity pledge ratioPledge20.0028∗∗∗0.0091∗∗∗0.0019∗0.0073∗(5.116)(4.382)(1.903)(1.856)Lev−0.0470−0.4253∗∗−0.0662−0.3476(−0.856)(−2.119)(−0.997)(−1.283)Growth−0.0086∗−0.0474∗∗∗−0.0166∗∗∗−0.0714∗∗∗(−1.787)(−2.754)(−2.796)(−2.768)Roe−0.2104∗∗∗−0.5995∗∗∗−0.04750.0501(−4.032)(−2.999)(−0.793)(0.300)Soe0.00870.2062−0.0286−0.0862(0.210)(1.170)(−0.433)(−0.486)Dual−0.0181−0.0251−0.0188−0.1035(−1.092)(−0.459)(−0.665)(−0.940)Board−0.0005−0.0006−0.00130.0004(−0.384)(−0.140)(−0.839)(0.071)Asset0.2111∗∗∗0.6037∗∗∗0.1634∗∗∗0.5549∗∗∗(18.040)(15.559)(9.284)(7.649)Constant−4.5093∗∗∗−12.9540∗∗∗−3.4661∗∗∗−11.9981∗∗∗(−17.365)(−15.148)(−8.864)(−7.502)YearYYYYIndustryYYYYObservations10,89310,8934,3194,319R-squared0.0960.0550.0690.043F68.3649.6314.9310.48Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.The core explanatory variable of Panel A is the dummy variable of equity pledge. It can be seen that the regression coefficient and significance in the eastern region are significantly higher than those in the noneastern region, which suggests that listed companies registered in eastern provinces and municipalities directly under the Central Government will participate more in stock repurchase to prevent the risk of control right transfer caused by equity pledge. Similarly, in order to prevent control right transfer, listed companies with a higher ratio of controlling shareholders’ equity pledge in the eastern region will increase the stock repurchase scale compared with listed companies in the noneastern region. The core explanatory variable of Panel B is the equity pledge ratio. It can be observed that listed companies in the eastern region with a higher proportion of controlling shareholders’ equity pledge are more inclined to carry out stock repurchase to prevent the risk of control right transfer and manage the market value.


### 6.2. Mechanism Test

#### 6.2.1. Controlling Shareholders’ Equity Pledge, Information Environment, and Listed Companies’ Stock Repurchase

According to the previous theoretical analysis, listed companies attempt to convey information to external investors through stock repurchase to raise the stock price. Then, the better the information environment is, that is, the more comprehensively the information is conveyed (the lower degree of information asymmetry), the more the information about stock repurchase can be perceived by investors. Meanwhile, listed companies with controlling shareholders’ equity pledge will be more active in stock repurchase. In this paper, the analysts’ attention is used as the proxy variable of enterprise information environment to test the mechanism.From column (1) and column (2) of Table9, it can be seen that the estimated coefficients of the interactive term between the dummy variable of the controlling shareholders’ equity pledge and analysts’ attention are 0.0014 and 0.0034, respectively, both of which are significantly positive, indicating that the higher the analysts’ attention is, the greater the possibility that the listed companies with equity pledge will carry out stock repurchase. From column (3) and column (4), it can be seen that the estimated coefficients of the interactive term between the ratio of controlling shareholders’ equity pledge and analysts’ attention are still significantly positive. It suggests that the smoother the information environment, the more obvious the motivation of listed companies to convey confidence to investors through stock repurchase to maintain the stock price and prevent the risk of control right transfer caused by equity pledge.Table 9
Estimated results of controlling shareholders’ equity pledge, information environment, and listed companies’ stock repurchase.
Variable(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase1Rpurchase2Pledge10.0458∗∗∗0.0574∗(3.992)(1.743)Pledge20.0028∗∗∗0.0083∗∗∗(4.388)(3.387)Analyst−0.0018∗∗∗−0.0114∗∗∗−0.0010−0.0098∗∗∗(−2.654)(−5.099)(−1.525)(−4.063)Pledge1×Analyst0.0014∗0.0034∗∗(1.701)(2.124)Pledge2×Analyst0.0073∗∗∗0.0079∗∗(3.679)(2.117)Lev−0.0560−0.4419∗∗∗−0.0554−0.4292∗∗∗(−1.283)(−2.728)(−1.275)(−2.658)Growth−0.0131∗∗∗−0.0635∗∗∗−0.0121∗∗∗−0.0602∗∗∗(−3.341)(−4.399)(−3.078)(−4.159)Roe−0.1491∗∗∗−0.2669∗−0.1361∗∗∗−0.2167(−3.585)(−1.733)(−3.270)(−1.427)Soe−0.00420.0898−0.00710.0971(−0.122)(0.672)(−0.203)(0.717)Dual−0.0182−0.0469−0.0196−0.0476(−1.282)(−0.962)(−1.373)(−0.974)Board−0.0006−0.0001−0.0007−0.0003(−0.664)(−0.041)(−0.741)(−0.085)Asset0.2035∗∗∗0.6535∗∗∗0.2022∗∗∗0.6195∗∗∗(20.123)(18.092)(20.084)(17.159)Constant−4.3459∗∗∗−13.9942∗∗∗−4.3089∗∗∗−13.2577∗∗∗(−19.451)(−17.695)(−19.276)(−16.697)YearYYYYIndustryYYYYObservations15,21215,21215,21215,212R-squared0.0890.0510.0900.053F73.7246.6463.4245.57Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.


#### 6.2.2. Controlling Shareholders’ Equity Pledge, Corporate Governance, and Listed Companies’ Stock Repurchase

When there are problems in the governance mechanism of listed companies, controlling shareholders may damage the value of listed companies through “hollowing out” and information manipulation. Therefore, the less negative information the company hides, the more willing the controlling shareholder is to convey information to the market through stock repurchase, in order to maintain the stock price. This paper uses the equity balance degree to measure the level of corporate governance.As can be seen from column (1) and column (2) of Table10, the estimated coefficients of the interactive term between the dummy variable of the controlling shareholders’ equity pledge and equity balance degree are significantly positive. Similarly, in column (3) and column (4), the estimated coefficients of the interactive term between the ratio of controlling shareholders’ equity pledge and equity balance degree are still significantly positive, which indicates that the higher the corporate governance level of listed companies, the greater the positive impact of equity pledge on listed companies’ stock repurchase.Table 10
Test results of controlling shareholders’ equity pledge, corporate governance, and listed companies’ stock repurchase.
Variable(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase1Rpurchase2Pledge10.0461∗∗∗0.0709(3.510)(1.568)Pledge20.0026∗∗∗0.0090∗∗∗(3.433)(3.064)Balance0.00320.1089∗0.00860.1287∗∗(0.194)(1.847)(0.554)(2.233)Pledge1 × Balance0.0187∗∗0.0343∗∗∗(2.301)(2.678)Pledge2 × Balance0.0000∗∗0.0005∗∗(2.071)(2.171)Lev−0.0521−0.3699∗∗−0.0486−0.3536∗∗(−1.186)(−2.263)(−1.110)(−2.168)Growth−0.0129∗∗∗−0.0618∗∗∗−0.0118∗∗∗−0.0583∗∗∗(−3.308)(−4.349)(−3.000)(−4.078)Roe−0.1667∗∗∗−0.4211∗∗∗−0.1577∗∗∗−0.3744∗∗(−4.131)(−2.844)(−3.901)(−2.563)Soe−0.00750.0771−0.00500.0950(−0.215)(0.571)(−0.141)(0.693)Dual−0.0186−0.0464−0.0194−0.0463(−1.305)(−0.946)(−1.353)(−0.946)Board−0.00060.0002−0.0007−0.0000(−0.646)(0.044)(−0.714)(−0.007)Asset0.1996∗∗∗0.6099∗∗∗0.1975∗∗∗0.5762∗∗∗(19.593)(17.807)(19.397)(16.771)Constant−4.2755∗∗∗−13.2355∗∗∗−4.2219∗∗∗−12.5060∗∗∗(−19.103)(−17.583)(−18.843)(−16.555)YearYYYYIndustryYYYYObservations15,21215,21215,21215,212R-squared0.0880.0490.0890.051F73.0546.6763.4146.06Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.


#### 6.2.3. Controlling Shareholders’ Equity Pledge, Earnings Management, and Listed Companies’ Stock Repurchase

Studies have found that earnings management can beautify the financial statements of enterprises and increase the net profit per share, so earnings management is used by listed companies to prevent control right transfer. Moreover, the equity pledge will affect listed companies’ choice between accrual earnings management and stock repurchase. In this paper, the earnings management of enterprises is measured by the nonoperational accrued profits calculated by the modified Jones model.From Table11, it can be seen that the interaction term between the dummy variable of equity pledge and earnings management and the interaction term between equity pledge ratio and earnings management are not significant, which shows that listed companies will not adopt earnings management to reduce stock repurchase under equity pledge.Table 11
Estimated results of controlling shareholders’ equity pledge, earnings management, and listed companies’ stock repurchase.
Variable(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase1Rpurchase2Pledge10.0601∗∗∗0.0979∗∗∗(6.500)(2.859)Pledge20.0024∗∗∗0.0080∗∗∗(4.782)(4.251)REM0.01700.1325−0.01990.0449(0.675)(1.464)(−0.964)(0.590)Pledge1×DA−0.0487−0.1016(−1.299)(−0.955)Pledge2×DA0.00050.0028(0.274)(0.503)Lev−0.0803∗−0.4710∗∗∗−0.0793∗−0.4584∗∗∗(−1.801)(−2.734)(−1.780)(−2.664)Growth−0.0108∗∗∗−0.0609∗∗∗−0.0096∗∗−0.0576∗∗∗(−2.774)(−4.154)(−2.468)(−3.919)Roe−0.1675∗∗∗−0.4229∗∗∗−0.1625∗∗∗−0.3867∗∗(−4.066)(−2.692)(−3.962)(−2.500)Soe−0.00700.0972−0.00670.1092(−0.200)(0.756)(−0.191)(0.840)Dual−0.0095−0.0357−0.0106−0.0371(−0.640)(−0.702)(−0.714)(−0.728)Board−0.0010−0.0008−0.0010−0.0009(−1.051)(−0.210)(−1.082)(−0.233)Asset0.1868∗∗∗0.5951∗∗∗0.1863∗∗∗0.5668∗∗∗(18.369)(17.270)(18.393)(16.456)Constant−3.9705∗∗∗−12.7738∗∗∗−3.9444∗∗∗−12.1484∗∗∗(−17.632)(−16.777)(−17.504)(−15.924)YearYYYYIndustryYYYYObservations14,24414,24414,24414,244R-squared0.0770.0430.0770.045F59.9540.8151.5439.97Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.


## 6.1. Controlling Shareholders’ Equity Pledge and Listed Companies’ Stock Repurchase: The Motivation of Stock Price Rising

According to the previous hypothesis, equity pledge is that listed companies tend to adopt the market value management method of stock repurchase to raise the stock price. Therefore, it can be expected that when listed companies are faced with serious risk of control right transfer, the controlling shareholders will have a stronger motivation to boost the stock price through stock repurchase. Therefore, this paper further carries out heterogeneity analysis by group according to the equity nature and regional differences.


### 6.1.1. Equity Nature, Controlling Shareholders’ Equity Pledge, and Listed Companies’ Stock Repurchase

According to the equity nature, this paper divides the samples into two groups of state-owned listed companies and nonstate-owned listed companies and carries out the regression by group. Table7 shows the results of regression by group.Table 7
Regression results of equity nature, controlling shareholders’ equity pledge, and listed companies’ stock repurchase.
Panel A core explained variable: dummy variable of equity pledgeVariableSoe = 1Soe = 0(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase1Rpurchase2Pledge10.00540.04330.0621∗∗∗0.0606∗∗∗(0.457)(0.984)(5.363)(3.409)Lev−0.1513∗∗∗−0.6337∗∗∗−0.0496−0.4267∗∗(−2.782)(−2.763)(−0.876)(−2.034)Growth−0.0107∗∗∗−0.0225∗−0.0083−0.0749∗∗∗(−3.187)(−1.745)(−1.321)(−3.280)Roe−0.0115−0.0741−0.2304∗∗∗−0.5836∗∗∗(−0.278)(−0.542)(−4.156)(−2.773)Dual0.02830.0565−0.0263−0.0568(1.451)(0.936)(−1.446)(−0.887)Board−0.00010.0014−0.0005−0.0001(−0.098)(0.359)(−0.346)(−0.016)Asset0.1000∗∗∗0.2752∗∗∗0.2403∗∗∗0.7619∗∗∗(7.697)(6.802)(18.542)(16.972)Constant−2.1888∗∗∗−5.9816∗∗∗−5.0450∗∗∗−16.0454∗∗∗(−7.327)(−6.429)(−17.741)(−16.541)YearYYYYIndustryYYYYObservations5,2745,2749,9389,938R-squared0.0340.0170.1070.059F10.017.80197.2358.45Panel B core explained variable: equity pledge ratioPledge20.0034∗∗0.0114∗0.0018∗∗∗0.0064∗∗∗(1.972)(1.851)(3.684)(3.317)Lev−0.1454∗∗∗−0.6190∗∗∗−0.0450−0.4004∗(−2.685)(−2.705)(−0.796)(−1.911)Growth−0.0104∗∗∗−0.0211−0.0074−0.0727∗∗∗(−3.108)(−1.644)(−1.168)(−3.175)Roe−0.0168−0.0913−0.2254∗∗∗−0.5252∗∗(−0.409)(−0.669)(−4.063)(−2.522)Dual0.02870.0572−0.0277−0.0566(1.463)(0.946)(−1.517)(−0.881)Board−0.00010.0014−0.0006−0.0004(−0.083)(0.371)(−0.402)(−0.076)Asset0.0974∗∗∗0.2692∗∗∗0.2429∗∗∗0.7212∗∗∗(7.644)(6.720)(18.884)(15.925)Constant−2.1338∗∗∗−5.8546∗∗∗−5.0746∗∗∗−15.1642∗∗∗(−7.286)(−6.358)(−17.807)(−15.370)YearYYYYIndustryYYYYObservations5,2745,2749,9389,938R-squared0.0380.0190.1060.060F10.157.85484.3358.01Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.The core explanatory variable of Panel A is the dummy variable of equity pledge. The regression results show that the regression coefficient andt value of column (3) are significantly larger than those of column (1), which indicates that whether there is an equity pledge in nonstate-owned listed companies has a significantly greater positive impact on the repurchase decision than state-owned listed companies. Moreover, the regression coefficient and t value of column (4) are significantly larger than those of column (2), which indicates that the stock repurchase scale of nonstate-owned listed companies with equity pledge is significantly larger than that of state-owned listed companies, which once again verifies the motivation of stock repurchase to boost stock price. The core explanatory variable of Panel B is the equity pledge ratio. From column (5) and column (7), it can be seen that the influence of state-owned listed companies’ equity pledge ratio on whether to carry out the stock repurchase is not particularly significant compared with that of nonstate-owned listed companies. However, it can be seen from column (8) that the regression coefficient and significance of the influence of the nonstate-owned listed companies’ equity pledge ratio on the stock repurchase scale are significantly higher than those of state-owned listed companies, which further verifies the motivation of stock repurchase.The reason is that the above-mentioned nonstate-owned companies tend to use stock repurchase to boost the stock price. This is because the nonstate-owned listed companies face a greater risk of control right transfer, while the pledge behavior of state-owned listed companies is strictly regulated. When the pledged stocks fall below the “liquidation line,” they cannot be forced to liquidate, which requires the approval of the regulators, thus restricting the transfer of state-owned stocks. In addition, the controlling shareholders of state-owned listed companies have strong social and political relationships, so they use political resources when the equity pledge crisis occurs.


### 6.1.2. Regional Differences, Controlling Shareholders’ Equity Pledge, and Listed Companies’ Stock Repurchase

According to the provinces and municipalities where the listed companies are registered, this paper divides the samples into the eastern region group and the western region group and carries out tests by group to demonstrate the influence path of listed companies’ equity pledge on stock repurchase under different marketization levels. See Table8 for the test results by group.Table 8
Regression results of regional differences, controlling shareholders’ equity pledge, and listed companies’ stock repurchase.
Panel A core explained variable: dummy variable of equity pledgeVariableEast = 1East = 0(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase1Rpurchase2Pledge10.0691∗∗∗0.0818∗∗∗0.0383∗∗∗0.0375∗∗(6.057)(3.923)(2.782)(2.011)Lev−0.0476−0.4357∗∗−0.0710−0.3675(−0.863)(−2.157)(−1.070)(−1.366)Growth−0.0098∗∗−0.0510∗∗∗−0.0175∗∗∗−0.0749∗∗∗(−2.035)(−2.974)(−2.957)(−2.930)Roe−0.2215∗∗∗−0.6644∗∗∗−0.05310.0271(−4.261)(−3.294)(−0.884)(0.159)Soe0.00440.1770−0.0214−0.0592(0.106)(1.014)(−0.325)(−0.338)Dual−0.0175−0.0262−0.0167−0.0961(−1.064)(−0.482)(−0.593)(−0.874)Board−0.0004−0.0003−0.00130.0005(−0.341)(−0.077)(−0.820)(0.082)Asset0.2126∗∗∗0.6478∗∗∗0.1661∗∗∗0.5680∗∗∗(18.031)(16.537)(9.431)(8.077)Constant−4.5611∗∗∗−13.9197∗∗∗−3.5376∗∗∗−12.3249∗∗∗(−17.523)(−16.194)(−9.089)(−7.950)YearYYYYIndustryYYYYObservations10,89310,8934,3194,319R-squared0.0960.0510.0680.042F75.6348.9217.8111.62Panel B core explained variable: equity pledge ratioPledge20.0028∗∗∗0.0091∗∗∗0.0019∗0.0073∗(5.116)(4.382)(1.903)(1.856)Lev−0.0470−0.4253∗∗−0.0662−0.3476(−0.856)(−2.119)(−0.997)(−1.283)Growth−0.0086∗−0.0474∗∗∗−0.0166∗∗∗−0.0714∗∗∗(−1.787)(−2.754)(−2.796)(−2.768)Roe−0.2104∗∗∗−0.5995∗∗∗−0.04750.0501(−4.032)(−2.999)(−0.793)(0.300)Soe0.00870.2062−0.0286−0.0862(0.210)(1.170)(−0.433)(−0.486)Dual−0.0181−0.0251−0.0188−0.1035(−1.092)(−0.459)(−0.665)(−0.940)Board−0.0005−0.0006−0.00130.0004(−0.384)(−0.140)(−0.839)(0.071)Asset0.2111∗∗∗0.6037∗∗∗0.1634∗∗∗0.5549∗∗∗(18.040)(15.559)(9.284)(7.649)Constant−4.5093∗∗∗−12.9540∗∗∗−3.4661∗∗∗−11.9981∗∗∗(−17.365)(−15.148)(−8.864)(−7.502)YearYYYYIndustryYYYYObservations10,89310,8934,3194,319R-squared0.0960.0550.0690.043F68.3649.6314.9310.48Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.The core explanatory variable of Panel A is the dummy variable of equity pledge. It can be seen that the regression coefficient and significance in the eastern region are significantly higher than those in the noneastern region, which suggests that listed companies registered in eastern provinces and municipalities directly under the Central Government will participate more in stock repurchase to prevent the risk of control right transfer caused by equity pledge. Similarly, in order to prevent control right transfer, listed companies with a higher ratio of controlling shareholders’ equity pledge in the eastern region will increase the stock repurchase scale compared with listed companies in the noneastern region. The core explanatory variable of Panel B is the equity pledge ratio. It can be observed that listed companies in the eastern region with a higher proportion of controlling shareholders’ equity pledge are more inclined to carry out stock repurchase to prevent the risk of control right transfer and manage the market value.


## 6.1.1. Equity Nature, Controlling Shareholders’ Equity Pledge, and Listed Companies’ Stock Repurchase

According to the equity nature, this paper divides the samples into two groups of state-owned listed companies and nonstate-owned listed companies and carries out the regression by group. Table7 shows the results of regression by group.Table 7
Regression results of equity nature, controlling shareholders’ equity pledge, and listed companies’ stock repurchase.
Panel A core explained variable: dummy variable of equity pledgeVariableSoe = 1Soe = 0(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase1Rpurchase2Pledge10.00540.04330.0621∗∗∗0.0606∗∗∗(0.457)(0.984)(5.363)(3.409)Lev−0.1513∗∗∗−0.6337∗∗∗−0.0496−0.4267∗∗(−2.782)(−2.763)(−0.876)(−2.034)Growth−0.0107∗∗∗−0.0225∗−0.0083−0.0749∗∗∗(−3.187)(−1.745)(−1.321)(−3.280)Roe−0.0115−0.0741−0.2304∗∗∗−0.5836∗∗∗(−0.278)(−0.542)(−4.156)(−2.773)Dual0.02830.0565−0.0263−0.0568(1.451)(0.936)(−1.446)(−0.887)Board−0.00010.0014−0.0005−0.0001(−0.098)(0.359)(−0.346)(−0.016)Asset0.1000∗∗∗0.2752∗∗∗0.2403∗∗∗0.7619∗∗∗(7.697)(6.802)(18.542)(16.972)Constant−2.1888∗∗∗−5.9816∗∗∗−5.0450∗∗∗−16.0454∗∗∗(−7.327)(−6.429)(−17.741)(−16.541)YearYYYYIndustryYYYYObservations5,2745,2749,9389,938R-squared0.0340.0170.1070.059F10.017.80197.2358.45Panel B core explained variable: equity pledge ratioPledge20.0034∗∗0.0114∗0.0018∗∗∗0.0064∗∗∗(1.972)(1.851)(3.684)(3.317)Lev−0.1454∗∗∗−0.6190∗∗∗−0.0450−0.4004∗(−2.685)(−2.705)(−0.796)(−1.911)Growth−0.0104∗∗∗−0.0211−0.0074−0.0727∗∗∗(−3.108)(−1.644)(−1.168)(−3.175)Roe−0.0168−0.0913−0.2254∗∗∗−0.5252∗∗(−0.409)(−0.669)(−4.063)(−2.522)Dual0.02870.0572−0.0277−0.0566(1.463)(0.946)(−1.517)(−0.881)Board−0.00010.0014−0.0006−0.0004(−0.083)(0.371)(−0.402)(−0.076)Asset0.0974∗∗∗0.2692∗∗∗0.2429∗∗∗0.7212∗∗∗(7.644)(6.720)(18.884)(15.925)Constant−2.1338∗∗∗−5.8546∗∗∗−5.0746∗∗∗−15.1642∗∗∗(−7.286)(−6.358)(−17.807)(−15.370)YearYYYYIndustryYYYYObservations5,2745,2749,9389,938R-squared0.0380.0190.1060.060F10.157.85484.3358.01Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.The core explanatory variable of Panel A is the dummy variable of equity pledge. The regression results show that the regression coefficient andt value of column (3) are significantly larger than those of column (1), which indicates that whether there is an equity pledge in nonstate-owned listed companies has a significantly greater positive impact on the repurchase decision than state-owned listed companies. Moreover, the regression coefficient and t value of column (4) are significantly larger than those of column (2), which indicates that the stock repurchase scale of nonstate-owned listed companies with equity pledge is significantly larger than that of state-owned listed companies, which once again verifies the motivation of stock repurchase to boost stock price. The core explanatory variable of Panel B is the equity pledge ratio. From column (5) and column (7), it can be seen that the influence of state-owned listed companies’ equity pledge ratio on whether to carry out the stock repurchase is not particularly significant compared with that of nonstate-owned listed companies. However, it can be seen from column (8) that the regression coefficient and significance of the influence of the nonstate-owned listed companies’ equity pledge ratio on the stock repurchase scale are significantly higher than those of state-owned listed companies, which further verifies the motivation of stock repurchase.The reason is that the above-mentioned nonstate-owned companies tend to use stock repurchase to boost the stock price. This is because the nonstate-owned listed companies face a greater risk of control right transfer, while the pledge behavior of state-owned listed companies is strictly regulated. When the pledged stocks fall below the “liquidation line,” they cannot be forced to liquidate, which requires the approval of the regulators, thus restricting the transfer of state-owned stocks. In addition, the controlling shareholders of state-owned listed companies have strong social and political relationships, so they use political resources when the equity pledge crisis occurs.


## 6.1.2. Regional Differences, Controlling Shareholders’ Equity Pledge, and Listed Companies’ Stock Repurchase

According to the provinces and municipalities where the listed companies are registered, this paper divides the samples into the eastern region group and the western region group and carries out tests by group to demonstrate the influence path of listed companies’ equity pledge on stock repurchase under different marketization levels. See Table8 for the test results by group.Table 8
Regression results of regional differences, controlling shareholders’ equity pledge, and listed companies’ stock repurchase.
Panel A core explained variable: dummy variable of equity pledgeVariableEast = 1East = 0(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase1Rpurchase2Pledge10.0691∗∗∗0.0818∗∗∗0.0383∗∗∗0.0375∗∗(6.057)(3.923)(2.782)(2.011)Lev−0.0476−0.4357∗∗−0.0710−0.3675(−0.863)(−2.157)(−1.070)(−1.366)Growth−0.0098∗∗−0.0510∗∗∗−0.0175∗∗∗−0.0749∗∗∗(−2.035)(−2.974)(−2.957)(−2.930)Roe−0.2215∗∗∗−0.6644∗∗∗−0.05310.0271(−4.261)(−3.294)(−0.884)(0.159)Soe0.00440.1770−0.0214−0.0592(0.106)(1.014)(−0.325)(−0.338)Dual−0.0175−0.0262−0.0167−0.0961(−1.064)(−0.482)(−0.593)(−0.874)Board−0.0004−0.0003−0.00130.0005(−0.341)(−0.077)(−0.820)(0.082)Asset0.2126∗∗∗0.6478∗∗∗0.1661∗∗∗0.5680∗∗∗(18.031)(16.537)(9.431)(8.077)Constant−4.5611∗∗∗−13.9197∗∗∗−3.5376∗∗∗−12.3249∗∗∗(−17.523)(−16.194)(−9.089)(−7.950)YearYYYYIndustryYYYYObservations10,89310,8934,3194,319R-squared0.0960.0510.0680.042F75.6348.9217.8111.62Panel B core explained variable: equity pledge ratioPledge20.0028∗∗∗0.0091∗∗∗0.0019∗0.0073∗(5.116)(4.382)(1.903)(1.856)Lev−0.0470−0.4253∗∗−0.0662−0.3476(−0.856)(−2.119)(−0.997)(−1.283)Growth−0.0086∗−0.0474∗∗∗−0.0166∗∗∗−0.0714∗∗∗(−1.787)(−2.754)(−2.796)(−2.768)Roe−0.2104∗∗∗−0.5995∗∗∗−0.04750.0501(−4.032)(−2.999)(−0.793)(0.300)Soe0.00870.2062−0.0286−0.0862(0.210)(1.170)(−0.433)(−0.486)Dual−0.0181−0.0251−0.0188−0.1035(−1.092)(−0.459)(−0.665)(−0.940)Board−0.0005−0.0006−0.00130.0004(−0.384)(−0.140)(−0.839)(0.071)Asset0.2111∗∗∗0.6037∗∗∗0.1634∗∗∗0.5549∗∗∗(18.040)(15.559)(9.284)(7.649)Constant−4.5093∗∗∗−12.9540∗∗∗−3.4661∗∗∗−11.9981∗∗∗(−17.365)(−15.148)(−8.864)(−7.502)YearYYYYIndustryYYYYObservations10,89310,8934,3194,319R-squared0.0960.0550.0690.043F68.3649.6314.9310.48Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.The core explanatory variable of Panel A is the dummy variable of equity pledge. It can be seen that the regression coefficient and significance in the eastern region are significantly higher than those in the noneastern region, which suggests that listed companies registered in eastern provinces and municipalities directly under the Central Government will participate more in stock repurchase to prevent the risk of control right transfer caused by equity pledge. Similarly, in order to prevent control right transfer, listed companies with a higher ratio of controlling shareholders’ equity pledge in the eastern region will increase the stock repurchase scale compared with listed companies in the noneastern region. The core explanatory variable of Panel B is the equity pledge ratio. It can be observed that listed companies in the eastern region with a higher proportion of controlling shareholders’ equity pledge are more inclined to carry out stock repurchase to prevent the risk of control right transfer and manage the market value.


## 6.2. Mechanism Test

### 6.2.1. Controlling Shareholders’ Equity Pledge, Information Environment, and Listed Companies’ Stock Repurchase

According to the previous theoretical analysis, listed companies attempt to convey information to external investors through stock repurchase to raise the stock price. Then, the better the information environment is, that is, the more comprehensively the information is conveyed (the lower degree of information asymmetry), the more the information about stock repurchase can be perceived by investors. Meanwhile, listed companies with controlling shareholders’ equity pledge will be more active in stock repurchase. In this paper, the analysts’ attention is used as the proxy variable of enterprise information environment to test the mechanism.From column (1) and column (2) of Table9, it can be seen that the estimated coefficients of the interactive term between the dummy variable of the controlling shareholders’ equity pledge and analysts’ attention are 0.0014 and 0.0034, respectively, both of which are significantly positive, indicating that the higher the analysts’ attention is, the greater the possibility that the listed companies with equity pledge will carry out stock repurchase. From column (3) and column (4), it can be seen that the estimated coefficients of the interactive term between the ratio of controlling shareholders’ equity pledge and analysts’ attention are still significantly positive. It suggests that the smoother the information environment, the more obvious the motivation of listed companies to convey confidence to investors through stock repurchase to maintain the stock price and prevent the risk of control right transfer caused by equity pledge.Table 9
Estimated results of controlling shareholders’ equity pledge, information environment, and listed companies’ stock repurchase.
Variable(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase1Rpurchase2Pledge10.0458∗∗∗0.0574∗(3.992)(1.743)Pledge20.0028∗∗∗0.0083∗∗∗(4.388)(3.387)Analyst−0.0018∗∗∗−0.0114∗∗∗−0.0010−0.0098∗∗∗(−2.654)(−5.099)(−1.525)(−4.063)Pledge1×Analyst0.0014∗0.0034∗∗(1.701)(2.124)Pledge2×Analyst0.0073∗∗∗0.0079∗∗(3.679)(2.117)Lev−0.0560−0.4419∗∗∗−0.0554−0.4292∗∗∗(−1.283)(−2.728)(−1.275)(−2.658)Growth−0.0131∗∗∗−0.0635∗∗∗−0.0121∗∗∗−0.0602∗∗∗(−3.341)(−4.399)(−3.078)(−4.159)Roe−0.1491∗∗∗−0.2669∗−0.1361∗∗∗−0.2167(−3.585)(−1.733)(−3.270)(−1.427)Soe−0.00420.0898−0.00710.0971(−0.122)(0.672)(−0.203)(0.717)Dual−0.0182−0.0469−0.0196−0.0476(−1.282)(−0.962)(−1.373)(−0.974)Board−0.0006−0.0001−0.0007−0.0003(−0.664)(−0.041)(−0.741)(−0.085)Asset0.2035∗∗∗0.6535∗∗∗0.2022∗∗∗0.6195∗∗∗(20.123)(18.092)(20.084)(17.159)Constant−4.3459∗∗∗−13.9942∗∗∗−4.3089∗∗∗−13.2577∗∗∗(−19.451)(−17.695)(−19.276)(−16.697)YearYYYYIndustryYYYYObservations15,21215,21215,21215,212R-squared0.0890.0510.0900.053F73.7246.6463.4245.57Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.


### 6.2.2. Controlling Shareholders’ Equity Pledge, Corporate Governance, and Listed Companies’ Stock Repurchase

When there are problems in the governance mechanism of listed companies, controlling shareholders may damage the value of listed companies through “hollowing out” and information manipulation. Therefore, the less negative information the company hides, the more willing the controlling shareholder is to convey information to the market through stock repurchase, in order to maintain the stock price. This paper uses the equity balance degree to measure the level of corporate governance.As can be seen from column (1) and column (2) of Table10, the estimated coefficients of the interactive term between the dummy variable of the controlling shareholders’ equity pledge and equity balance degree are significantly positive. Similarly, in column (3) and column (4), the estimated coefficients of the interactive term between the ratio of controlling shareholders’ equity pledge and equity balance degree are still significantly positive, which indicates that the higher the corporate governance level of listed companies, the greater the positive impact of equity pledge on listed companies’ stock repurchase.Table 10
Test results of controlling shareholders’ equity pledge, corporate governance, and listed companies’ stock repurchase.
Variable(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase1Rpurchase2Pledge10.0461∗∗∗0.0709(3.510)(1.568)Pledge20.0026∗∗∗0.0090∗∗∗(3.433)(3.064)Balance0.00320.1089∗0.00860.1287∗∗(0.194)(1.847)(0.554)(2.233)Pledge1 × Balance0.0187∗∗0.0343∗∗∗(2.301)(2.678)Pledge2 × Balance0.0000∗∗0.0005∗∗(2.071)(2.171)Lev−0.0521−0.3699∗∗−0.0486−0.3536∗∗(−1.186)(−2.263)(−1.110)(−2.168)Growth−0.0129∗∗∗−0.0618∗∗∗−0.0118∗∗∗−0.0583∗∗∗(−3.308)(−4.349)(−3.000)(−4.078)Roe−0.1667∗∗∗−0.4211∗∗∗−0.1577∗∗∗−0.3744∗∗(−4.131)(−2.844)(−3.901)(−2.563)Soe−0.00750.0771−0.00500.0950(−0.215)(0.571)(−0.141)(0.693)Dual−0.0186−0.0464−0.0194−0.0463(−1.305)(−0.946)(−1.353)(−0.946)Board−0.00060.0002−0.0007−0.0000(−0.646)(0.044)(−0.714)(−0.007)Asset0.1996∗∗∗0.6099∗∗∗0.1975∗∗∗0.5762∗∗∗(19.593)(17.807)(19.397)(16.771)Constant−4.2755∗∗∗−13.2355∗∗∗−4.2219∗∗∗−12.5060∗∗∗(−19.103)(−17.583)(−18.843)(−16.555)YearYYYYIndustryYYYYObservations15,21215,21215,21215,212R-squared0.0880.0490.0890.051F73.0546.6763.4146.06Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.


### 6.2.3. Controlling Shareholders’ Equity Pledge, Earnings Management, and Listed Companies’ Stock Repurchase

Studies have found that earnings management can beautify the financial statements of enterprises and increase the net profit per share, so earnings management is used by listed companies to prevent control right transfer. Moreover, the equity pledge will affect listed companies’ choice between accrual earnings management and stock repurchase. In this paper, the earnings management of enterprises is measured by the nonoperational accrued profits calculated by the modified Jones model.From Table11, it can be seen that the interaction term between the dummy variable of equity pledge and earnings management and the interaction term between equity pledge ratio and earnings management are not significant, which shows that listed companies will not adopt earnings management to reduce stock repurchase under equity pledge.Table 11
Estimated results of controlling shareholders’ equity pledge, earnings management, and listed companies’ stock repurchase.
Variable(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase1Rpurchase2Pledge10.0601∗∗∗0.0979∗∗∗(6.500)(2.859)Pledge20.0024∗∗∗0.0080∗∗∗(4.782)(4.251)REM0.01700.1325−0.01990.0449(0.675)(1.464)(−0.964)(0.590)Pledge1×DA−0.0487−0.1016(−1.299)(−0.955)Pledge2×DA0.00050.0028(0.274)(0.503)Lev−0.0803∗−0.4710∗∗∗−0.0793∗−0.4584∗∗∗(−1.801)(−2.734)(−1.780)(−2.664)Growth−0.0108∗∗∗−0.0609∗∗∗−0.0096∗∗−0.0576∗∗∗(−2.774)(−4.154)(−2.468)(−3.919)Roe−0.1675∗∗∗−0.4229∗∗∗−0.1625∗∗∗−0.3867∗∗(−4.066)(−2.692)(−3.962)(−2.500)Soe−0.00700.0972−0.00670.1092(−0.200)(0.756)(−0.191)(0.840)Dual−0.0095−0.0357−0.0106−0.0371(−0.640)(−0.702)(−0.714)(−0.728)Board−0.0010−0.0008−0.0010−0.0009(−1.051)(−0.210)(−1.082)(−0.233)Asset0.1868∗∗∗0.5951∗∗∗0.1863∗∗∗0.5668∗∗∗(18.369)(17.270)(18.393)(16.456)Constant−3.9705∗∗∗−12.7738∗∗∗−3.9444∗∗∗−12.1484∗∗∗(−17.632)(−16.777)(−17.504)(−15.924)YearYYYYIndustryYYYYObservations14,24414,24414,24414,244R-squared0.0770.0430.0770.045F59.9540.8151.5439.97Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.


## 6.2.1. Controlling Shareholders’ Equity Pledge, Information Environment, and Listed Companies’ Stock Repurchase

According to the previous theoretical analysis, listed companies attempt to convey information to external investors through stock repurchase to raise the stock price. Then, the better the information environment is, that is, the more comprehensively the information is conveyed (the lower degree of information asymmetry), the more the information about stock repurchase can be perceived by investors. Meanwhile, listed companies with controlling shareholders’ equity pledge will be more active in stock repurchase. In this paper, the analysts’ attention is used as the proxy variable of enterprise information environment to test the mechanism.From column (1) and column (2) of Table9, it can be seen that the estimated coefficients of the interactive term between the dummy variable of the controlling shareholders’ equity pledge and analysts’ attention are 0.0014 and 0.0034, respectively, both of which are significantly positive, indicating that the higher the analysts’ attention is, the greater the possibility that the listed companies with equity pledge will carry out stock repurchase. From column (3) and column (4), it can be seen that the estimated coefficients of the interactive term between the ratio of controlling shareholders’ equity pledge and analysts’ attention are still significantly positive. It suggests that the smoother the information environment, the more obvious the motivation of listed companies to convey confidence to investors through stock repurchase to maintain the stock price and prevent the risk of control right transfer caused by equity pledge.Table 9
Estimated results of controlling shareholders’ equity pledge, information environment, and listed companies’ stock repurchase.
Variable(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase1Rpurchase2Pledge10.0458∗∗∗0.0574∗(3.992)(1.743)Pledge20.0028∗∗∗0.0083∗∗∗(4.388)(3.387)Analyst−0.0018∗∗∗−0.0114∗∗∗−0.0010−0.0098∗∗∗(−2.654)(−5.099)(−1.525)(−4.063)Pledge1×Analyst0.0014∗0.0034∗∗(1.701)(2.124)Pledge2×Analyst0.0073∗∗∗0.0079∗∗(3.679)(2.117)Lev−0.0560−0.4419∗∗∗−0.0554−0.4292∗∗∗(−1.283)(−2.728)(−1.275)(−2.658)Growth−0.0131∗∗∗−0.0635∗∗∗−0.0121∗∗∗−0.0602∗∗∗(−3.341)(−4.399)(−3.078)(−4.159)Roe−0.1491∗∗∗−0.2669∗−0.1361∗∗∗−0.2167(−3.585)(−1.733)(−3.270)(−1.427)Soe−0.00420.0898−0.00710.0971(−0.122)(0.672)(−0.203)(0.717)Dual−0.0182−0.0469−0.0196−0.0476(−1.282)(−0.962)(−1.373)(−0.974)Board−0.0006−0.0001−0.0007−0.0003(−0.664)(−0.041)(−0.741)(−0.085)Asset0.2035∗∗∗0.6535∗∗∗0.2022∗∗∗0.6195∗∗∗(20.123)(18.092)(20.084)(17.159)Constant−4.3459∗∗∗−13.9942∗∗∗−4.3089∗∗∗−13.2577∗∗∗(−19.451)(−17.695)(−19.276)(−16.697)YearYYYYIndustryYYYYObservations15,21215,21215,21215,212R-squared0.0890.0510.0900.053F73.7246.6463.4245.57Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.


## 6.2.2. Controlling Shareholders’ Equity Pledge, Corporate Governance, and Listed Companies’ Stock Repurchase

When there are problems in the governance mechanism of listed companies, controlling shareholders may damage the value of listed companies through “hollowing out” and information manipulation. Therefore, the less negative information the company hides, the more willing the controlling shareholder is to convey information to the market through stock repurchase, in order to maintain the stock price. This paper uses the equity balance degree to measure the level of corporate governance.As can be seen from column (1) and column (2) of Table10, the estimated coefficients of the interactive term between the dummy variable of the controlling shareholders’ equity pledge and equity balance degree are significantly positive. Similarly, in column (3) and column (4), the estimated coefficients of the interactive term between the ratio of controlling shareholders’ equity pledge and equity balance degree are still significantly positive, which indicates that the higher the corporate governance level of listed companies, the greater the positive impact of equity pledge on listed companies’ stock repurchase.Table 10
Test results of controlling shareholders’ equity pledge, corporate governance, and listed companies’ stock repurchase.
Variable(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase1Rpurchase2Pledge10.0461∗∗∗0.0709(3.510)(1.568)Pledge20.0026∗∗∗0.0090∗∗∗(3.433)(3.064)Balance0.00320.1089∗0.00860.1287∗∗(0.194)(1.847)(0.554)(2.233)Pledge1 × Balance0.0187∗∗0.0343∗∗∗(2.301)(2.678)Pledge2 × Balance0.0000∗∗0.0005∗∗(2.071)(2.171)Lev−0.0521−0.3699∗∗−0.0486−0.3536∗∗(−1.186)(−2.263)(−1.110)(−2.168)Growth−0.0129∗∗∗−0.0618∗∗∗−0.0118∗∗∗−0.0583∗∗∗(−3.308)(−4.349)(−3.000)(−4.078)Roe−0.1667∗∗∗−0.4211∗∗∗−0.1577∗∗∗−0.3744∗∗(−4.131)(−2.844)(−3.901)(−2.563)Soe−0.00750.0771−0.00500.0950(−0.215)(0.571)(−0.141)(0.693)Dual−0.0186−0.0464−0.0194−0.0463(−1.305)(−0.946)(−1.353)(−0.946)Board−0.00060.0002−0.0007−0.0000(−0.646)(0.044)(−0.714)(−0.007)Asset0.1996∗∗∗0.6099∗∗∗0.1975∗∗∗0.5762∗∗∗(19.593)(17.807)(19.397)(16.771)Constant−4.2755∗∗∗−13.2355∗∗∗−4.2219∗∗∗−12.5060∗∗∗(−19.103)(−17.583)(−18.843)(−16.555)YearYYYYIndustryYYYYObservations15,21215,21215,21215,212R-squared0.0880.0490.0890.051F73.0546.6763.4146.06Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.


## 6.2.3. Controlling Shareholders’ Equity Pledge, Earnings Management, and Listed Companies’ Stock Repurchase

Studies have found that earnings management can beautify the financial statements of enterprises and increase the net profit per share, so earnings management is used by listed companies to prevent control right transfer. Moreover, the equity pledge will affect listed companies’ choice between accrual earnings management and stock repurchase. In this paper, the earnings management of enterprises is measured by the nonoperational accrued profits calculated by the modified Jones model.From Table11, it can be seen that the interaction term between the dummy variable of equity pledge and earnings management and the interaction term between equity pledge ratio and earnings management are not significant, which shows that listed companies will not adopt earnings management to reduce stock repurchase under equity pledge.Table 11
Estimated results of controlling shareholders’ equity pledge, earnings management, and listed companies’ stock repurchase.
Variable(1)(2)(3)(4)Rpurchase1Rpurchase2Rpurchase1Rpurchase2Pledge10.0601∗∗∗0.0979∗∗∗(6.500)(2.859)Pledge20.0024∗∗∗0.0080∗∗∗(4.782)(4.251)REM0.01700.1325−0.01990.0449(0.675)(1.464)(−0.964)(0.590)Pledge1×DA−0.0487−0.1016(−1.299)(−0.955)Pledge2×DA0.00050.0028(0.274)(0.503)Lev−0.0803∗−0.4710∗∗∗−0.0793∗−0.4584∗∗∗(−1.801)(−2.734)(−1.780)(−2.664)Growth−0.0108∗∗∗−0.0609∗∗∗−0.0096∗∗−0.0576∗∗∗(−2.774)(−4.154)(−2.468)(−3.919)Roe−0.1675∗∗∗−0.4229∗∗∗−0.1625∗∗∗−0.3867∗∗(−4.066)(−2.692)(−3.962)(−2.500)Soe−0.00700.0972−0.00670.1092(−0.200)(0.756)(−0.191)(0.840)Dual−0.0095−0.0357−0.0106−0.0371(−0.640)(−0.702)(−0.714)(−0.728)Board−0.0010−0.0008−0.0010−0.0009(−1.051)(−0.210)(−1.082)(−0.233)Asset0.1868∗∗∗0.5951∗∗∗0.1863∗∗∗0.5668∗∗∗(18.369)(17.270)(18.393)(16.456)Constant−3.9705∗∗∗−12.7738∗∗∗−3.9444∗∗∗−12.1484∗∗∗(−17.632)(−16.777)(−17.504)(−15.924)YearYYYYIndustryYYYYObservations14,24414,24414,24414,244R-squared0.0770.0430.0770.045F59.9540.8151.5439.97Note. The t-test value is in brackets, using company-level clustering robust standard error; ∗, ∗∗, and ∗∗ are significant at the level of 10%, 5%, and 1%, respectively.


## 7. Research Conclusions and Policy Implications

Based on the data on controlling shareholders’ equity pledge and China’s A-share listed companies’ stock repurchase from 2013 to 2021, this paper empirically tests the influence and internal mechanism of controlling shareholders’ equity pledge on listed companies’ stock repurchase. It is found that listed companies will stabilize the stock price through stock repurchase to prevent the risk of control right transfer caused by stock price decline. First, there is a positive correlation between equity pledge and stock repurchase, which is more significant among nonstate-owned listed companies and listed companies in the eastern region. Further research shows that the positive impact of equity pledge on stock repurchase is more significant under the condition of a good information environment and good corporate governance. However, the earnings management of listed companies has no significant impact on the positive impact of equity pledge on stock repurchase. In addition, this paper also tests the robustness of propensity score matching, alternative explanatory variables, and explained variables. All of them prove that the conclusions of this paper are reliable.The research conclusion of this paper has important practical significance and experience enlightenment. First of all, China’s stock repurchase began in 2005, but there are many restrictions. In 2018, China’s regulators revised relevant laws and regulations to encourage stock repurchase, aiming to correct the stock price and guide the stock price to the actual price. However, the China Securities Regulatory Commission and other institutions should strengthen supervision of stock repurchase to prevent listed companies from covering up the actual financial situation through stock repurchase and abusing stock repurchase to drive up stock prices. In addition, it is necessary to strengthen the information environment and corporate governance of listed companies, reduce the degree of information asymmetry of listed companies, and effectively monitor controlling shareholders’ behaviors, such as opportunism.



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*Source: 1676841-2022-04-13.xml*