Corporate Governance,Stock Pledge,and Trading Halts Manipulation

More recently,some issues happened in Chinese stock market crash of 2015 have drawn a wide public attention in academia.Especially,how corporate governance and stock pledge affect corporate trading halts decisions and the influences have received much attention of regulators worldwidely.However,the relevance of corporate governance and stock pledge to corporate decisions is little understood.I fill this gap by examining the impact of corporate governance and stock pledge on the trading halts decisions and its short-run market reaction and long-run influence from China A-share stock market.We focus on the trading halt of A-share market during the period of Chinese stock market crash in 2015 and explore the in-depth reasons and insiders' incentives behind the trading halts and its influence through theoretical and empirical analysis.Based on the research hypotheses,this paper examines how corporate governance and stock pledge affect corporate trading halts decisions.Using China Stock Market Crash in 2015 as a natural experiment,we find corporate governance like management's ownership proportion and net holding by institutional investors and stock pledge all have positive impact on the company implements trading halts in stock crash.However,ownership concentration has negative impact since large shareholders have more shares to meet margin call.Furthermore,I find such trading halts during the stock market crash have negative impact on the company's performance in the short and long run,namely trading halts loss using the PSM method and DID model.In the short run,trading halts loss is mainly caused by institutional investors' punishment.Though trading halts in stock crash can slow down the decline of stock price and reduce the pressure from the lenders,it exposed corporate insiders' moral hazard to some extent.We contribute to the literature at least by two aspects.First,this paper originally studies the trading halts in the A-share stock market of China from the perspective of corporate finance.And I add to my understanding about the impact of corporate governance and stock pledge on corporate trading halts decisions.Second,I contribute to the literature by adding that listed companies' insiders are more likely to use trading halts to meet margin call pressure in order to keep control rights.And this behavior can cause the company's trading halts loss of performance in the short and mid-long run.Becides,we figured out that stock pledge became the new motivation of China's listed companies' insiders' stake-raising after stock crash.