The Heterogenous causality of repurchases: Analysis from the aspect of share collateralization
研究中国上市公司大股东股权质押与公司股票回购之间的因果关系，发现高质押率增加回购可能性，且国企与民企回购动机和效果存在显著差异。
We explore the unique heterogeneity feature of the Chinese market to examine the relationship between firms' share collateralization by its largest shareholders and corporate repurchases. Furthermore, we analyze the divergent incentives resulting in different consequences for the performance of private firms and state-owned enterprises (SOEs). The policy effect of an amendment to the Company Law of the People's Republic of China is studied using the difference-in-differences method. The measure is changed to ensure the reliability and robustness of the causality results between collateralization and repurchases. The results show that higher collateralization increases the likelihood of firms' share repurchases. The repurchase incentive of firm performance diverges between private firms and SOEs. Some SOEs even attempt to support the policy and blindly herd to repurchase shares; however, when SOEs are assured of their operational efficiency, repurchases increase their profitability. Private firms use repurchases as a share price stabilizer to protect the interests of their large shareholders rather than to benefit minority and small shareholders. These results provide policy feedback and demonstrate the complexity of controlling for corporate incentives when market interests are highly mixed. • This study investigates the causality relationship between firms' share collateralization by its largest and corporate share repurchases in the Chinese market. • The finding shows that share collateralization increases the likelihood of corporate share repurchase. • Further, the policy effect of the Company law amendment is analyzed by the difference-in-difference method, and the results show that the change in Chinese firm law encouraging repurchases deteriorates firms' profitability. • The state-owned enterprises (SOEs) and non-SOEs show diverged repurchase incentives.