Abstract:

Based on the data of China’s A-share listed companies from 2013 to 2021, this paper explores the impact of controlling shareholders’ equity pledge on MD&A text information embellishment, and analyzes the moderating effect of institutional investor heterogeneity on the relationship between the two. The results show that controlling shareholders will strategically whitewash MD&A text information after equity pledge; Pressure-resistant institutional investors play a negative moderating role in the relationship between equity pledge and MD&A text information embellishment, while pressure-sensitive institutional investors do not play a moderating role. Further analysis shows that in enterprises with high financing constraints, poor corporate reputation and high degree of information asymmetry, controlling shareholders have stronger motivation to whitewash MD&A text information, and the supervision role of pressure resistant institutional investors is also stronger. In this regard, it is of great necessity to strengthen the supervision of controlling shareholders in the future, formulate detailed rules for the disclosure of annual report text information, optimize the structure of institutional investors, and promote the healthy development of capital market in China.

Key words: equity pledge, textual information whitewash, institutional investors heterogeneity, pressure resistance type, pressure-sensitive type