Equity Pledging Of Shareholders,Stock Price Volatility And Holding Tendency

Equity pledge refers to a form of financing where shareholders pledge the company's equity to banks,securities companies or other financial institutions and obtain liquidity funds.Prior to 2013,equity pledges were mainly pledged to banks,trust companies and other institutions in the form of off-site pledges.Due to some complicated procedures and legal risks,the pledging scale was limited.In May 2013,the launch of the "Measures for Stock Pledged Repurchase Transactions and Registration and Settlement Business" provided a legal basis for on-site pledges with securities companies as the main body.The advantages of simple operation and high financing efficiency have led to rapid expansion of financing scale.Equity pledges alleviate the financing constraints faced by shareholders,but when the stock price touches the warning line or liquidation line,the pledgee has the right to sell the stock to the market,and the shareholders cannot face the risk of losing control right if they cannot add collateral.Then,will the major shareholders take measures to stabilize the stock price after the pledge to prevent the loss of control?In this paper,through empirical research on the equity pledge data of Shanghai and Shenzhen A-share listed companies from 2014 to 2018,it is found that the equity pledge of large shareholders is negatively correlated with stock price fluctuations.However,this conclusion is not true for state-owned enterprises.The study found that the pledge of shareholder equity of state-owned enterprises is positively correlated with stock price fluctuations.That is,the pledge of stockholders exacerbates stock price fluctuations.The question to be further explored is,what methods will the major shareholders take to stabilize the stock price?In theory,large shareholders can increase their stock prices by working hard to improve operating performance,but usually have a longer cycle and weak effect;on the other hand,large shareholders have more information advantages and control power,and can stabilize stock prices through earnings management or shareholding increase..Existing domestic literature studies mostly prove that the increase in shareholding can send a positive signal to the market and bring a positive market response.Increased shareholding is a faster method than increasing the stock price through improving operating performance.Large shareholders may take this way to stabilize stock prices.This paper finds through empirical research:First,the increase in holdings can effectively reduce stock price volatility,and the higher the increase in shareholding ratio,the smaller the stock price volatility;Second,the equity pledge of large shareholders is positively correlated with the tendency to increase holdings,which indicates that the majority shareholder will increase shareholding to stabilize the stock price after pledging.Finally,companies with more concentrated shareholdings have a stronger tendency to increase their holdings after pledged.This is because the more concentrated shareholding structure,the more likely it is that the large shareholders will use the information asymmetry to stabilize stock prices.This article enriches the theoretical research on the relationship between equity pledge and stock price,and discusses the possible shareholder's behavior after equity pledging.The possible innovations are as follows:1.Most of the previous literatures focused on the research of controlling shareholder behavior.This article expands the research scope to major shareholders;2.The conclusion of this article is that the negative correlation between equity pledge and stock price fluctuations is not the same as the existing literature,and more clearly distinguished the impact of equity pledges on stock price fluctuations under different property rights;third,linking equity pledges of major shareholders with the increase in shareholding behavior,enriching the motivation for increasing shareholdings.