Large Shareholders' Stock Pledge And Optimistic Tendency Of Analysts' Recommendation

In May 2013,the Shanghai and Shenzhen Stock Exchange joint with Chinese securities set up a trial measure for stock pledge repurchase transactions.This method put the securities companies into the pledge of equity pledge.In the record of the more than 1500 stock pledge transactions at the end of 2016,more than 60% of the equity pledge pledged to a securities company.It can be seen that securities companies have become the main participants in equity pledge business.Based on this background,this paper's research is starting from the perspective of public information and interest conflict,explores the impact of the pledge of large shareholders on the optimistic tendencies of the analysts' reports.First of all,starting from the public information of the listed companies,the demand for the market value management motivation of large shareholders and management will be increased,and the quality and transparency of information disclosure will be reduced,which will further increase the evidence.The difficulty of analyst causes the analysts' recommendation rating report to be biased.From the perspective of conflict of interest,large shareholders with equity pledge can prevent stock prices from falling by others' rescue-"good words" by an analyst of the joint pledge securities company or "no talk" in bad circumstances.The "collusion" under this conflict of interest may also enable the analysts of the pledged parties to voluntarily issue a recommendation rating report with optimism.Further,the higher the proportion of the equity pledge of the large shareholders,the higher the risk of controlling the transfer of the listed companies.Once the collapse occurs,both the big shareholders and the listed companies will face more serious consequences.So the higher the proportion of the pledge,the more the large shareholders want the analysts to help.Finally,the herd effect among analysts would make the overall rating of analysts optimistic,so is this optimism a result of the impact of the rating of a pledge analyst on other independent analysts?In order to verify the above problems,this paper takes the stock pledge in June 2013 to December 2016 and the A stock listed company of the securities company as the sample.Through the empirical analysis,the following basic conclusions are obtained: First,in the case of the same conditions,the quality of the analysts' recommendation rating is more optimistic than the recommended ratings of other independent analysts.Second,from the overall sample,the higher the proportion of large shareholders' equity pledged,the more optimistic of the analyst's recommendation rating.According to whether the analyst is belonging to the pledgee,this paper found that the positive correlation is more prominent in the recommendation rating of the analyst which is belonging to the pledgee.Third,independent analysts who publish ratings after the pledgees' analysts will be influenced by the optimism tendency of the pledgees' analysts.The main contributions of this paper are as follows: using the recommended rating index to test the influence path of the individual financial behavior of the stockholder's equity pledge of large shareholders,and the influence of the equity pledge on the optimistic tendency of the analysts,and then reveals that this effect is not only aggravated by the previous related relations,but also increases with the increase in the proportion of the large shareholders' equity pledge.This paper enriches the research on the factors that influence the optimism tendency of analysts,and the herd effect theory of behavioral finance analysts.