The Pledge Of Equity By Major Shareholders And Accounting Conservatism

In recent year,pledge of equity seems much more popular and common in China.The major shareholders would like to gain money by pledging stocks because of its convenience.Basing on this,this paper studies whether the behavior of stock pledge will affect the level of accounting conservatism of one company and which factors will exert remarkable influence on its financial decisions.So we examine the relationship between stock pledge by major shareholder and accounting conservatism for a sample of China Shanghai Exchange and Shenzhen Stock Exchange on A-share from 2007 to 2015.Through empirical analysis,we find that the pledge of equity of the major shareholder has a positive effect on the accounting conservatism of a company.The more stocks the major shareholder pledges,the higher accounting conservatism the company is.Also,seeing from the influencing factors,the financial policies of the non-state-owned enterprises are more conservative comparing to the state-owned enterprises.What's more,when the monetary policy is tight,the accounting conservatism of a company is higher.Overall,the research results of this paper reveals that the pledge of equity of major shareholders will result in higher accounting conservatism and influence the financial decisions of a company.This research study has important value on the behavior of major shareholders.This paper enriches the content of research on the factors of accounting conservatism and the economic consequences of stock pledge,and it is very meaningful for us to disclose more stock pledge information,protect the pledgees and intensify social supervision.