Financing constraints are important to triggering controlling shareholders' share pledges. However, the related literature faces two major challenges: the endogeneity problem and the lack of direct evidence of why and how individual share pledges can ease corporate financing constraints. Based on China's Share Pledge Reform (SPR) in Q4 2012 and the phenomenon that private firms face discrimination when obtaining bank loans, this paper studies the impact of financing constraints on share pledging behavior and its mechanisms by building a difference-in-differences (DID) model. The SPR makes it more convenient for shareholders to raise money through share pledges, and shareholders of private firms facing stronger financing constraints are more vulnerable to this reform than are state-owned enterprises (SOEs). After the SPR, the probability of share pledging by controlling shareholders of private firms is approximately 23.04% higher than that of controlling shareholders of SOEs, and the pledge ratio is approximately 16.53% higher. Further tests reveal that, after the SPR, controlling shareholders of private firms are more inclined than those of SOEs to provide loans to the company to alleviate its financing constraints. Heterogeneity tests further corroborate the finding that this effect is more significant in private firms that are smaller and do not have shareholders of banking and institutional firms among their top ten shareholders.

Controlling shareholders dominate corporations and shareholder exit behavior is usually accompanied by the transfer of control. Using China's A-share listed companies as data from 2000 to 2017, this study investigates the effect of corporate litigation on the exit of controlling shareholders and related mechanisms for the first time. Empirically, we find that if a firm is involved in a lawsuit as a defendant, then the possibility of the controlling shareholder's exit increases. This finding is robust to various checks, including the parallel-trend assumption, placebo, instrumental variable tests, and the consideration of other potential factors. The tests reveal that this effect is mainly due to an increase in three aspects—the uncertainty of the firm's future cash flow, corporate risk, and external financing costs. Heterogeneity analyses find that contract lawsuits exhibit the strongest positive predictive powers over the subsequent exits of controlling shareholders. The firm's majority controlling shareholders, and institutional, non-family, and non-financial controlling shareholders are more likely to exit upon litigation.