The Impact of Controlling Shareholders’ Equity Pledges on Corporate Investment

Drawing upon agency theory and the perspective of control rights, this study investigates the dynamics between controlling shareholders' equity pledges (CSEP) and corporate investments within China's A-share listed firms from 2009 to 2020, particularly focusing on the mediating role of the tunneling costs and the moderating influence of internal governance mechanism.The empirical findings reveal that CSEP exerts a negative impact on corporate investments.This conclusion remains robust regarding fixed asset investments and R&D expenditures, replacing independent variables and employing the propensity score matching method.Furthermore, the tunneling costs mediate the relationship between CSEP and corporate investments, while effective internal governance mechanism mitigated this adverse effect.Notably, the impact of CSEP on corporate investments was more pronounced in non-state-owned and manufacturing companies.This insight enhances our comprehension of the underlying motives behind CSEP and broadens the scope of research into agency costs and internal governance mechanism.