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The Negative Effect of Share Pledging by Controlling Shareholders under COVID-19

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  • Dengjin Zheng
  • Xin Dai
  • Tianqi Lan
  • Wei Zhang
  • Jian Mou

Abstract

This paper tests the superimposed negative market reaction of listed companies with high-level share pledging by controlling shareholders to the coronavirus disease 2019 (COVID-19) pandemic and finds that it is alleviated in the pharmaceutical industry and when the share pledge funds are obtained from a brokerage firm or flow back to the listed companies. Furthermore, a low-quality information environment exacerbates the negative reaction, while high-level research and development (R&D) investment and free cash flow alleviate it. A possible mechanism underlying the results is that the “gray rhino” erodes the company’s operating efficiency. This paper provides timely and direct evidence regarding the capital market’s response to COVID-19.

Suggested Citation

  • Dengjin Zheng & Xin Dai & Tianqi Lan & Wei Zhang & Jian Mou, 2021. "The Negative Effect of Share Pledging by Controlling Shareholders under COVID-19," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(10), pages 2826-2837, August.
    • Handle: RePEc:mes:emfitr:v:57:y:2021:i:10:p:2826-2837
    DOI: 10.1080/1540496X.2021.1904885
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    Cited by:

    1. Chen, Shi & Huang, Fu-Wei & Lin, Jyh-Horng, 2022. "Life insurance policyholder protection, government green subsidy, and cap-and-trade transactions in a black swan environment," Energy Economics, Elsevier, vol. 115(C).
    2. Zhang, Xiaoqing, 2023. "The value of online investor relations under COVID-19: Evidence from investor interactive platforms in China," Finance Research Letters, Elsevier, vol. 56(C).

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