Equity Pledge Of Controlling Shareholder And Stock Price Crash Risk

In 2010,the margin trading and short selling program formally entered the market,which represented the end of the one-sided market and the birth of the short selling mechanism.At the same time,equity pledge became common in capital market.However,with the frequent occurrence of the crash of stock market in recent years,the factors affecting stock price crash have been a hot topic in the academic field.Based on this,this paper makes a theoretical and empirical study on the relationship between the equity pledge of controlling shareholders and stock price crash risk,considering the effect of margin trading and short selling program.Firstly,this paper puts forward the hypothesis on the basis of related literature and theory.Secondly,this paper chooses domestic listed companies with equity pledge behavior between 2010 and 2018 as the sample data,uses NCSKEW and DUVOL as the index of stock price crash.Finally,two hypotheses in this paper are validated by means of descriptive statistics,correlation analysis and multiple regression analysis.The empirical results show that: First,based on the "Supervising Effect ",the higher the proportion of equity pledge,the smaller the risk of stock price crash.Considering principal-agent problem,controlling shareholder as the largest shareholder,has an important position in the company,and when its equity is pledged,it may face the risk of losing private interest or even corporate control.In order to protect its own wealth and control rights,the controlling shareholder has incentive to supervise managers,which can effectively avoid managers accumulating bad news and effectively reduce stock price crash risk.Second,the larger the scale of margin trading,the negative correlation between equity pledge and stock price crash risk is weakened.Controlling shareholders can obtain sufficient money through capital market,and the possibility of equity pledge will be reduced.Then,supervision motivation will also be weakened.Stock price crash risk is likely to increase.At the same time,margin trading sends a positive signal to the market that qualified investors are positive about the company's development.Other investors will also have confidence in the company.But when negative news comes,the stock price bubble bursts,herding effect can trigger a panic sell-off.Therefore,margin trading as an external factor,its leverage effect will also reduce supervision effect of controlling shareholders,and stock price crash risk increases.At the end,this paper puts forward policy recommendations on the equity pledge system and margin trading policy,in order to prevent stock price crash.