Manipulation Of Stock Trading Halt And Equity Pledge Of Major Shareholders

Major shareholders and management as well as other insiders often regard the loose stock trading halt system in China as a tool for interest manipulation.And recently the regulators have drawn attention to the problem of manipulation of the stock trading halt caused by equity pledge of major shareholder,while few professional scholars have discussed the issue in a scientific method.The "Half of Listed Stock Halted" event in China happened in 2015 provides a rare quasi-natural experimental environment for the study on the relationship between the equity pledge of major shareholders and the manipulation of the stock trading halt of listed companies in China’s A-share market,thus the relevant empirical research is carried out in this paper.Specifically,based on the specific circumstances of the event,we define the event period as the nine trading days from June 29,2015 to July 9,2015.Using the data of equity pledge of major shareholders of listed companies on June 30,2015 and the stock trading halt data in the event,we investigate the relationship between the equity pledge of major shareholders and the manipulation of the stock trading halt of listed companies in China’s A-share market.We find robust evidence that:(1)There is a significant higher probability of stock trading halt in the event period and significant longer halt time in companies which have the equity pledge of major shareholders than companies that do not.(2)In the sub-sample of the stock halt companies,the higher the proportion of the shares the major shareholders pledged,the longer the halt time during the event;(3)Compared with companies that only second large shareholders pledged their stock,there is a significant higher possibility of stock trading halt in companies that only the largest shareholder pledges its stock;(4)Compared with state-owned companies,private listed companies have a significant higher possibility of stock trading halt and significant longer halt time.Our research suggests that major shareholders,especially the largest shareholder apt to manipulating a stock trading halt to avoid mandatory liquidation caused by the stock price falling to hit the close position.The main contributions of this paper are to use the quasi-natural experimental environment of the”Half of Listed Stocks Halted " event in China,and to provide empirical evidence of manipulation of stock trading halt in the context of equity pledge of major shareholders.On the one hand,the research can effectively enrich literatures on the stock halt manipulation and equity pledge of major shareholders.On the other hand,the policy enlightenments of this research helps to improve the halt system of China’s stock market,to standardize the conduction of equity pledge of major shareholders of listed companies,to protect the interests of small and medium investors.