Equity Pledge And Stock Price Crash

Due to the characteristics of simple operation,controllable risk,good liquidity and so on,equity pledge is gradually favored by many shareholders of listed companies.However,although the equity pledge helps to ease the financing constraints of listed companies,the equity pledge is not so safe as imagined,the existence of the line will have the risk of the loss of ownership.Once the stock price touches the opening line,pledged equity will be sold,the stock will face a great risk of stock price collapse,the controlling shareholder of the pledge will face the risk of transfer of controlling right.Therefore,the controlling shareholder who pledges his equity will have an impact on the stock price crash.Under the background of the increasingly popular pledge of shares,we need to make a deep reflection on the economic consequences of equity pledge.For this reason,this paper analyzes the changes of the stock price risk of the listed companies after the equity pledge.Theoretically,this text basing on the exposition of equity pledge influence on the stock price collapse risk on the impact on the way was analyzed,found that the controlling shareholder equity pledge to reduce the stock crash risk by earnings management,but also will increase overinvestment,thereby increasing the risk of collapse.In the empirical research,this paper selects the 2008-2014 data of listed companies as the research sample,using Chen(2001),Richardson(2006)'s model,after adding some control variables,we use relevant indexes on the proposed hypotheses for empirical research.Draw the following conclusions:(1)when the controlling shareholder pledge his equity,the collapse risk of the listed companies will be significantly reduced;(2)when the controlling shareholder of the state-owned companies pledge their equity,there is a strong negative correlation between equity pledge and stock price crash risk;(3)in order to reduce stock crash risk,the controlling shareholder will make market management by earnings management to;(4)when the controlling shareholder pledge their share,the overinvestment of the listed company is more serious,and the risk of the stock price collapse will increase.The innovation of this paper lies in:firstly,there is little research about the effect of equity pledge in academic world,this paper enriches the research in this field;secondly,according to the research about equity pledge and stock price collapse in academia,the paper innovatively comes up with two channels which the former influence the latter,and verified it.It enriches the academic circles to study the relationship between the equity pledge and the stock price collapse,and it helps controlling shareholder who pledge their equity to reduce the negative impact.What's more,this paper provides the key point for supervision and management,which is of great practical significance.