The spillover effects of share pledging by controlling shareholders in business groups: evidence from the accounting information quality of unpledged firms

Controlling shareholders’ share pledges have attracted growing attention for their corporate consequences. This paper examines whether such pledges generate spillover effects on the accounting information quality of unpledged firms within the same business group. We find that unpledged firms exhibit significantly higher accounting information quality when controlling shareholders pledge shares in other firms. The effect operates through reduced tunnelling from unpledged firms and strengthened financial risk containment, and is stronger when control-cash flow rights divergence is greater or group internal ties are tighter, institutional ownership of pledged group firms is lower, pledged and unpledged firms operate in the same industry, pledged firms are in regions with higher marketization, the business group is non-state-owned or relatively smaller. By situating the analysis within the business group context, our study expands the boundary of spillover consequences of share pledges, deepens understanding of their real economic effects, and sheds new light for future research.