An Empirical Study On The Impact Of Controlling Shareholder's Equity Pledge Ratio On Stock Price Manipulation Behavior And Stock Price Crash Risk

In recent years,the phenomenon of equity pledge of listed companies has become more and more common.According to the Wind data,as of November 27,2018,there were 2008 listed companies that had pledged their shares in China within one year,accounting for 56.4%of the total number of A-share companies.And the total pledge was about 4.6 trillion yuan,accounting for 10%of the total equity.On the one hand,the market value of the stocks before the controlling shareholders pledge their equity determines the amount of loan funds that can be obtained.On the other hand,the controlling shareholders may face greater risk of loss of control rights after the pledge,especially for controlling shareholders with a higher ratio of pledge.Based on this background,this paper explores the relationship between the controlling shareholder's ratio of equity pledge and the behavior of market value management.This paper takes the new equity pledge of the controlling shareholder of the private A-share listed companies in Shanghai and Shenzhen stock markets from 2009 to 2016 as samples,and studies the relationship between the the controlling shareholder's ratio of equity pledge and market value management or stock price strengthening.Furthermore,the paper discusses the ways and means of strengthening the stock price and reducing the risk of stock price crash under the condition of high ratio of equity pledge of controlling shareholders.The research finds:(1)Compared with the low ratio of equity pledge,the stock price performs better and the stock trading is more active within 30 days before the high ratio of equity pledge of controlling shareholders,showing as bigger cumulative abnormal return(CAR)and the change of volume of stock trading.Before the pledge,they may have inflated the stock price through behavior of market value management.(2)Compared with low-ratio-pledge companies,high-ratio-pledge companies have less risk of stock price crash in that year;in further research,it is also found that compared with low-ratio-pledge companies,high-ratio-pledge companies' forecasting errors and dispersion of analysts are bigger,but their performance is not as good as low-ratio-pledge companies.The reason may be that high-ratio-pledge companies adopts information disclosure manipulation rather than trying to improve their performance to maintain stock price to reduce the risk of stock price crash.(3)In the robustness test,this paper replaces the calculation method of key variables to re-regress the research model,and the above results are still significant.