Major Shareholders' Equity Pledge and Investment Myopia
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The paper examines the relationship between major shareholders' equity pledge and potential investment myopia. Taking reduction on R&D expenditure as a sign for investment myopia, it studies effect of equity pledge on corporate R&D input using data of listed companies in China between 2013 and 2018. Empirical results show that equity pledge by major shareholders negatively affect corporate input in R&D activities, and may be a cause of investment myopia. The negative effect is more evident among privately controlled companies and companies with CEO-Chairman duality. The results are robust as well with alternative measures of R&D, lagged explanatory variables, and the PSM sample.
Equity pledge, investment, myopia