Promoter's share pledging and investment-The role of financial constraints

This paper delves into the intricate dynamics of share pledging and its impact on investment, while specifically addressing the influence of financial constraints on this relationship. The study reveals a significant negative relationship between share pledging and investments. Notably, the adverse effects of share pledging are exacerbated in financially constrained firms. Moreover, the study also unveils an inverse relationship between Research and Development (R&D) intensity and share pledging, particularly pronounced in financially constrained contexts. The findings underscore the prevalence of the leverage effect and fund expropriation hypothesis over the augment effect and mitigation effect hypothesis.