Research On Risks And Positive Feedback Of Equity Pledge

In recent years,with the rapid development of Chinese capital market,many financial inventions emerged.As a new way of financing,equity pledge is becoming more and more popular.During the stock crash in the second half of the year 2015,the positive feedback risk of equity pledge was emerging.This paper researched on the influence of equity pledge on the secondary market from two aspects of theory and empirical research.At first,this paper explains the mechanism of the equity pledge positive feedback mechanism and illustrates the three paths in which stock pledge could affect stock price.In the empirical research part,this paper conducts the following three work: 1)using cross-section regression to prove that stocks with different pledge percent could have different risk features;2)using event-study to prove that certain stock pledge event could affect the cumulative abnormal return(CAR)in a negative way;3)using auto-regressive model to prove that equity pledge has positive feedback effect in the secondary market.