Information Disclosure,Timing And Controlling Shareholders' Stock Pledge In China

It has been a common phenomenon that large shareholders occupy interests of minority shareholders in Chinese listed corporations.Stock pledge,a new financing way of controlling shareholders,has aggravated the second type of agent problem.Based on Principal-agent Theory,Efficient Market Hypothesis and Signaling Theory,this paper examines the relationships between stock pledge and two aspects on information disclosure and timing with an A-stock market perspective in China,choosing 964 corporations from 2015 to 2016 as main research objects.Thereinto,cumulative average abnormal return,market adjusted model and stock mispricing are respectively used to measure effects of stock pledge announcement as well as reflection of stock market,distinctions of information disclosure and timing.The empirical results show that:(i)controlling shareholders can obtain significant positive abnormal return in the process of stock pledge,which has a negative impact on market reflection and a significant influence on stock prices.(ii)controlling shareholders will pledge stocks after good performance preannouncement and before bad one instead.(iii)controlling shareholder will utilize the stock market to initiatively choose when to pledge stocks,that's to say,they tend to pledge stocks when stocks are overvalued in a stock market.Therefore,the paper proposes three policy suggestions in respect of information,corporations and regulations as follows:(i)reinforce information diclosure and establish effective disclosure mechanism.(ii)improve corporation governance and strengthen controlling shareholders' responsibilities who pledge stocks.(iii)augment cooperation among regulators and set up a valid risk control system.