International Business and Entrepreneurship Faculty Publications and Presentations
Document Type
Article
Publication Date
11-2021
Abstract
Share pledging has become popular as a method of loan collateral among Chinese shareholders. Our research used a sample of Chinese listed firms between 2008–2018 and produced two main findings. Firstly, we found a negative association between stock price risk and firm profitability. Our second finding was that the interaction effect of share pledging and stock price risk is greater on firm profitability than the effect of stock price risk itself. We examined the role of share pledging by modeling pooled OLS and fixed effects using share pledging behavior, controlling shareholders’ share pledging and the share pledging ratio to reinforce the robustness of our results. Furthermore, we investigated the Davis Double Play effect of share pledging to analyze how share pledging affects stock price risk. We found that higher EPS and investor expectations cannot mitigate the positive impact of share pledging on stock price risk. That is, the reduction of EPS and the deterioration of investor expectations caused by share pledging risk will not further aggravate the stock price risk, as shareholders may have taken some managerial actions to affect the transmission mechanism.
Recommended Citation
Li, F., Zhang, X. and Ortiz, J., 2021. Linkages between share pledging, stock price risk and profitability: Evidence from the PR China. Plos one, 16(11), p.e0260040. https://doi.org/10.1371/journal.pone.0260040
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Publication Title
PLoS One
DOI
https://doi.org/10.1371/journal.pone.0260040
Comments
Copyright: © 2021 Li et al. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.