In October 2024, the paper 'Share Pledging and Corporate Misconduct,' co-authored by Professor Xu Sheng (corresponding author) from the School of Finance at Zhongnan University of Economics and Law, Li Mingyang (a 2022 graduate with a Master's degree in Financial Engineering and current PhD candidate at the School of Economics, Huazhong University of Science and Technology), Professor Lawrence Kryzanowski from Concordia University in Canada, and Associate Professor Jie Zhang from Trent University, was published online in the international B-level journal, British Accounting Review. Established by the British Accounting and Finance Association (BAFA) in 1969, the British Accounting Review primarily publishes cutting-edge original research in the fields of accounting and finance. Indexed in the SSCI JCR Q1 zone, the journal had an impact factor of 5.1 in 2022 and is rated A* in the ABDC Journal Quality Guide and three stars in the Academic Journal Guide.

Abstract: We investigate and find a significant and positive relation between share pledging by controlling shareholders and the likelihood of corporate misconduct. The results remain robust after classifying misconduct into accounting and non-accounting misconduct, and misconduct receiving severe and light penalties. Alleviation of financial constraints, inflation of stock prices, mitigation of margin calls, and expropriation under poor corporate governance are the main motives for corporate misconduct by firms with pledging controlling shareholders. The positive relation between share pledging and corporate misconduct propensity remains after accounting for endogeneity issues, political connections, intensified bank monitoring, and share repurchases.

Author Introduction

Xu Sheng is a Professor of Financial Engineering at the School of Finance, Zhongnan University of Economics and Law, and holds a PhD in Quantitative Economics from the School of Economics, Huazhong University of Science and Technology. His research areas include capital markets, financial technology, inclusive finance, and corporate governance. He has published numerous papers in domestic and international journals such as Accounting Research, Finance & Trade Economics, International Finance Research, and Journal of Zhongnan University of Economics and Law. He has presided over research projects funded by the National Social Science Fund and the Ministry of Finance, among others. He received the Third Prize of Excellent Achievement in Social Science Research in Hubei Province in 2020, the Second Prize of Hubei Provincial Government Development Research Award in 2018, the Third Prize of Excellent Achievement in Decision Support for the Hubei Provincial Party Committee in 2014, and the Third Prize of the Eighth Hubei Provincial Excellent Achievement in Social Science Research in 2013. Currently, he serves as the Executive Dean of the FinTech Research Institute at Zhongnan University of Economics and Law, the Deputy Director of the Hubei Provincial Collaborative Innovation Center for Industrial Upgrading and Regional Finance, and holds concurrent positions as the Standing Director of the China Financial Engineering Annual Conference and the Standing Director of the FinTech and Big Data Technology Branch of the National Teaching and Research Association for Industrial Statistics.