Research On The Impact Of Equity Pledge Events On Short-term Stock Prices

With the development of China's securities market,equity pledge has become an important financing method for listed companies due to its convenient operation and high transferability.However,the pledge of equity sometimes has a serious negative impact on the stock price,leading to the short position of the stock in the capital market,thus causing the stock price to fall sharply.This paper thinks that the pledge of equity reflects the signal that the major shareholders may have financial difficulties to the market.According to the second kind of agency cost theory,the financial difficulties of controlling major shareholders may encourage the tunneling effect of tunneling by major shareholders,which is not conducive to corporate governance.Therefore,the market often gives a negative reaction to equity pledge events.This paper argues that for different companies,the impact of equity pledge events on stock prices is unbalanced.Generally speaking,the more active the secondary market is,the more effective the stock price can reflect the information.The more liquid a company's shares are,the more likely short-term shocks that do not alter its fundamentals are to be suppressed by active arbitrage exchanges.Therefore,for companies with strong liquidity,the impact of equity pledge events is relatively weak.The discovery that high liquidity is more conducive to a firm's value will calm short-term movements in share prices.Conversely,for the lack of liquidity of the company,the short-term stock price volatility may be large.Based on this research idea,the following research design is made in this paper to test whether this research hypothesis is true.That is,whether the stock price response of different liquidity companies to the equity pledge event is consistent in the short term.According to the research hypothesis of this paper,even if the equity pledge event occurs in those highly liquid companies,the short-term impact on the company's stock price is relatively small.The explained variable in this paper is the relative return rate of stocks within the window period of equity pledge events [-5,15].First,a long window period [-180,-6] is selected to fully reflect the return on assets of the company during this period,including many factors such as the company's fundamentals,industry and risk level.These factors should not change in the short term,so the expected rate of return should be consistent with the rate of return as measured by the company.However,in the window period [-5,15],it examines the real return rate of the stock.Compared with the expected return rate,the obtained value can be considered as the extra impact caused by specific events.In this paper,if there is no additional impact of specific events,the fundamentals of the company should not change systematically in the short term,and the company will not be impacted by the macro economy,etc.,so the expected rate of return should be maintained.If there is a macroeconomic shock,it should have been priced into expected yields over longer periods.That is to say,the window period of expected yield has taken into account many effects including macroeconomic fluctuations over the same period.Therefore,this paper believes that the impact of equity pledge events on short-term stock prices can be measured by the real return rate during the window period [-5,15] minus the expected return rate during the window period [-180,-6].The explanatory variable of this paper is the stock liquidity in the window period of equity pledge events [-5,15].Domestic and foreign scholars generally recognize and widely use bid-ask spread,turnover rate,illiquidity and other indicators to measure stock liquidity.Considering the availability of data and calculation cost,bid-ask spread is measured based on liquidity width,turnover rate is measured based on liquidity depth,while non-liquidity index is a comprehensive index based on the combination of price and trading volume,which overcomes the shortage of measuring by width and depth alone.Therefore,this paper chooses the illiquidity index to measure the stock liquidity,and illiquidity is negatively related to liquidity.This paper selects the stocks of csi 300 index from 2014 to 2018 as research samples and adopts the method of multiple regression to explore the impact of equity pledge events on short-term stock prices from the perspective of stock liquidity.The empirical study finds that :(1)the higher the stock liquidity,the smaller the negative short-term impact caused by equity pledge events,that is,the smaller the short-term fluctuation of the stock price,which is reflected in the higher the relative return rate of the stock in the research window.(2)Compared with the comprehensive effect of multiple equity pledge behaviors,the higher the stock liquidity,the smaller the negative short-term impact caused by equity pledge events,when the equity pledge first occurs in each company during the window period.Although there have been a lot of studies on the short-term impact of equity pledge events on stock prices,this paper,from a new research perspective,argues that the response of stock liquidity to this event is inconsistent.High liquidity of the company even if the equity pledge event,the short-term impact on the company's stock price is relatively small.This new perspective fully considers the response of liquidity to equity pledge events,which has corresponding research value.It also further deepens the price discovery function of secondary market liquidity and enriches the theory of corporate finance.Finally,Suggestions are put forward for regulators,controlling shareholders and investors respectively,in the hope of alleviating the risk of equity pledge and making contributions to the steady development of the financial market.