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Exploring the Impact of Major Shareholder Equity Pledging on Enterprise Innovation: A Moderated Mediation Model

Author(s)

Pufeng Wu*, Binghong Lin, Tan Yang

Affiliation(s)

School of Economics and Administration, Xi’an University of Technology, Xi’an, China *Corresponding Author

Abstract

This study investigates how agency issues stemming from major shareholders’ equity pledges affect enterprise innovation through managerial characteristics. This paper constructs a theoretical framework to examine the effect of controlling shareholder equity pledging on enterprise innovation, focusing on two key managerial attributes: risk preference and managerial ability. It develops a moderated mediation model in which managerial risk preference mediates the relationship between equity pledging and enterprise innovation, while managerial ability moderates this mediating effect. Six hypotheses are proposed and tested using standardized empirical methods. Empirical results demonstrate that equity pledging by major shareholders is negatively related to managers’ risk preferences, which in turn fully mediate the impact of equity pledging on enterprise innovation. Furthermore, managerial ability negatively moderates the mediating effect of managerial risk preference. This study enriches the literature by incorporating the internal heterogeneity of managers into the analysis of equity pledge outcomes. By highlighting the interplay between managerial risk preferences and abilities, it contribute to the understanding of how personal attributes of executives shape the consequences of major shareholders’ financial behavior on firm-level innovation. The findings aim to inform enterprises on how to structure equity pledge financing more judiciously, enhance managerial effectiveness, mitigate operational risks, and foster innovation.

Keywords

Managerial Risk Preference; Managerial Ability; Moderated Mediation; Equity Pledge; Enterprise Innovation

References

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