Research On Share Pledge Of Substantial Shareholder's Of Listed Companies And Stock Price Crash Risk

On May 24,2013,the Shanghai Stock Exchange and China Securities Depository and Clearing Corporation Limited jointly issued the ?Stock Pledged Repo Trading and Registration and Settlement Business Measures(Trial)?,symbolizing that the unique share pledge business of the securities company –Stock Pledged Repo Trading(Hereinafter referred to as "stock pledge")had come to the historical stage.After five years of development,this business has become one of the major financing methods for substantial shareholders of listed companies along with the traditional OTC pledge business.Along with this is a series of risks brought about by substantial shareholder's share pledge.The substantial shareholders of listed companies tend to satisfy their cash needs through share pledge,which will inevitably increase the pledge proportion of a single stock.High-proportion pledge will bring a series of risk problems: If the stock price decline touches the cordon of liquidation of a substantial shareholder,the pledged shares will be closed out by pledgee,and the stock price will continue to decline,thus touching the cordon of liquidation of other substantial shareholders.More and more pledged shares will be closed out by pledgee,causing the stock price to fall further.Such a chain reaction may even bring the risk of a stock price crash.Today,the risk problem of high-proportion share pledge is becoming more and more serious.It is of great theoretical and practical significance to clarify the relationship between high-proportion share pledge and the stock price crash risk,whether for the relevant regulatory authorities such as the CSRC,or for the pledgee and investors.This paper first explains the theoretical basis of share pledge and stock price crash risk,and then introduces the status quo and risk characteristics of China's substantial shareholder's share pledge.Furthermore,the key problems of this paper are put forward: Will the high-proportion of substantial shareholder's share pledge of listed companies increase the stock price crash risk of individual stock? When the nature of the companies involved in the pledge is different and the nature of the pledge shares is different,will the stock price crash risk caused by the high-proportion share pledge be different? This paper then conducts an empirical study on these issues: Firstly,introduce a series of control variables that may affect the stock price crash risk in order to rule out the impact of other factors on the stock price crash risk.Secondly,compare the stock price crash risk between high-proportion pledged stock and non-high-proportion pledged stock,then verify the impact of the nature of the company involved in the pledge and the nature of the pledged shares on the relationship between the two.Finally,through the DID model,the differences between high-proportion pledged stocks and non-high-proportion pledged stocks are considered.At the same time,the paper conducted a robustness test.The study found that the high-proportion share pledge of substantial shareholders will significantly increase the stock price crash risk;compared with state-controlled listed companies,in the non-state-controlled listed companies,the positive correlation between the high-proportion share pledge and the stock price crash risk is stronger;when there is a high proportion of pledge,compared to the restricted shares,when the pledge shares are tradable shares,the stock price crash risk is higher.Therefore,this paper suggests: Firstly,from the perspective of proportion of share pledge,it is necessary to strictly control the overall pledge proportion of a single stock and prevent high-proportion of pledge.Secondly,the regulatory policy of non-state-controlled listed companies and tradable shares should be more stringent and can be started from the perspectives of whether continuous pledge,pledge period,use of pledge funds,proportion of pledge,etc.,to prevent stock price crash risk caused by share pledge behavior.Thirdly,the pledgee should pay attention to cash flow risk and control rights transfer risk brought by the share pledge to the listed company,and proactively financing according to demand to improve the skills of identifying risks.Fourthly,investors should be vigilant against high-proportion share pledges,actively learn relevant investment knowledge,and pay attention to risk prevention.