Stock Pledge And Stock Price Crash Risk

Under the background of the gradual normalization of stock pledge and the frequent occurrence of stock price crash,whether stock pledge affects stock price crash and how it affects the stock price crash has become a focus issue in the research.This article takes the Shanghai and Shenzhen A-share listed company as a sample from 2006 to 2016,based on the risk of transferring control rights brought by the stock pledge,and compares the two forming mechanisms of the stock price crash: “information hiding hypothesis” and the “uncertainty hypothesis”.We found that the higher the proportion of stock pledge,the higher the risk of stock price crash was not due to the “bad news” that large shareholders concealed,and it was more likely due to the high risk of transferring control rights,resulting in an increase in uncertainty,supporting the "uncertainty hypothesis." Further,this article explores the two conditions of the stock price crash caused by uncertainty: the control rights of large shareholders and investor sentiment.With lower shareholding ratio and lower investor sentiment,the positive relationship between stock pledge rate and stock price crash risk is even more significant.Not only does this paper enrich the study of the causes of the stock price crash from “uncertainty",but also enriches the research on the influence of stock pledge on the capital market from the perspective of the degree of stock pledge(the proportion of stock pledge).In addition,this article provides a new perspective for investors to forecast and prevent the stock price crash risk.Under the condition of high stock pledge ratio,investors should be more careful about companies with lower shareholding ratios and lower investors' sentiments.It also serves as a reference for stabilizing financial markets and promoting the healthy development of financial markets.