ABSTRACT This study investigates controlling shareholders' share pledging motivations in China, focusing on alignment with firms' future development needs. Using the LDA model on annual reports, we find that pledging intensity in topics like Primary Business and New Energy positively correlates with subsequent pledging. Moderation analysis reveals that government subsidies mitigate this relationship, while financing constraints exacerbate it. Further analysis shows that pledging‐funded strategic investments enhance return on assets. Heterogeneity tests indicate these effects are more pronounced in non‐state‐owned firms and during the COVID‐19 pandemic. Our findings support the ‘propping’ motive, suggesting share pledging serves as a vital internal financing bridge. Policy implications emphasise that regulators should shift from simple pledging caps to information‐based oversight, encouraging transparent disclosure of funds' use to mitigate adverse selection risks and support corporate resilience.
Liu et al. (Tue,) studied this question.