Equity Pledge Of Large Shareholders And Crash Risk

In China's capital market,large shareholders of listed companies often face financing constraints.However,due to the status of major shareholders,the risk of weakening control rights and other factors,large shareholders are unwilling and unable to finance by reducing their holdings of stocks.On the other hand,applications procedures for credit or bond issuance from banks are rigorous and time-consuming.In contrast,the financing method of equity pledge is efficient and convenient.Since 2015,market-wide stocks have soared,and many shareholders who do not have the right to reduce their holdings have used equity pledges to leverage.For the current A-share market,the total market value of the outstanding shares pledged by the major shareholders has reached 1.051326 trillion,and the one close to the open line has reached 2.980426 trillion yuan.Due to the tight liquidity of the stock market in recent years,the stock price of many listed companies has plummeted,and when the stock price reaches the balance line,the sell-off of the pledge to the stock will lead to the risk that the large shareholders of the enterprise face the risk of transfer of control.Investors will also have to face a share price crash caused by a massive increase in secondary market selling.Therefore,it is very important for enterprises,financial institutions and capital markets to identify and prevent the risk of stock pledge under any market environment.The statistic samples for this paper are A-share listed companies from 2007 to2017.First,this paper has sorted out the existing literature,and expounds the related theory of stock pledge and stock price collapse risk.Then,this paper puts forward the research hypothesis and introduces the measurement methods of variables including the stock pledge,the crash risk and the real earnings management.Last but not least,in empirical analysis,firstly,by constructing the fixed effect model,this paper studies the impact of the share pledge of large shareholders on the risk of stock price collapse.Then the paper introduces the interactive item between the share holding ratio and the share pledge to study the influence of the share holding ratio.At the same time,this paper also explores the intermediary way to influence the risk of stock price collapse by real earnings management after the pledge of major shareholders' shares.The following conclusions are drawn:under other certain conditions,the risk of future stock price collapse of A-share listed companies with large shareholder pledge is even greater,that is,the relationship between the two is positive.Compared with the large shareholders of A-share listed companies with high shareholding ratio,the financing behavior of equity pledge with lower shareholding ratio ismore positively correlated with the risk of stock price collapse.The higher the degree of real earnings management is,the higher the degree of manipulation of real earnings management is,and the more likely it is to trigger the risk of stock price collapse at the company level in the future.In the end,this paper puts forward the measures and suggestions from three angles: large shareholders,financial institutions and regulators of A-share listed companies.