Controlling Shareholders’ Equity Pledge,Share Repurchase And Stock Price Crash Risk

After the promulgation of the Measures for Stock Pledge Repurchase Transactions and Registration and Settlement Business in 2013,equity pledge has gradually become a financing method widely used by listed companies.As of December 2021,a total of 2129 listed companies in the A-share market have pledged the shares of controlling shareholders,accounting for 44.19%.The regularization of equity pledges provides many conveniences for the financing of major shareholders,but also brings the risk of control transfer that cannot be ignored.In recent years,the A-share market has fluctuated greatly,and the transfer of control caused by equity pledge explosions has frequently become the focus of market attention.After the controlling shareholder has pledged the shares,the sensitivity of the company’s stock price has increased significantly,and there is a strong incentive to adopt market value management methods to maintain its control.In 2018,the amendment to the New Company Law clearly stated that listed companies can repurchase shares out of the need to maintain the value of the company,increasing the share repurchase situation and simplifying the relevant approval procedures,and stock repurchase has gradually become a more conventional market value management method.When the pledge of controlling shareholders makes the transfer of control a real problem that must be faced,will such companies be more inclined to carry out share repurchases? How has the market reacted to share repurchases carried out by companies with equity pledges from controlling shareholders? The relationship between this needs to be further explored.This paper finds through empirical research: First,the equity pledge of the controlling shareholder and the stock repurchase are positively correlated.Second,the equity pledge of the controlling shareholder weakens the market response of the company’s stock repurchase,and the short-term cumulative excess yield after the company’s repurchase without the equity pledge of the controlling shareholder is significantly higher.Third,the stock repurchase has a signal transmission effect,which can reduce the risk of stock price collapse to a certain extent,but the equity pledge of the controlling shareholder plays a negative regulatory role in this process.Based on the above research results,this paper believes that the repurchase under the equity pledge of the controlling shareholder may be an opportunistic act made by the controlling shareholder to maintain control,and the market recognizes this potential risk,resulting in a relatively poor short-term market response after the repurchase,and there is no significant improvement in the long-term stock price stability.This paper innovatively explores the economic consequences of equity pledge from the perspective of stock repurchase,enriches the research on the influencing factors of stock price crash risk,and also plays a certain role in risk reminder for small and medium-sized investors.