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Share pledges, tone of earnings communication conferences, and market reaction: evidence from China

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  • Wanlong Zhao
  • Wei Zhang
  • Xiong Xiong
  • Gaofeng Zou

Abstract

We investigate how share pledging affects firms’ disclosures and influences investors in Chinese stock market. The tone of firm disclosures when there are shares pledged by controlling shareholders is more positive than that of firms without them. Considering tone inflation motivation and ability simultaneously, we find share pledge risk has an inverted U‐shaped relation with tone. Investors react positively to tone in short‐run windows, and firms with controlling shareholders’ pledges have higher stock returns for earnings communication conferences. We identify an inverted U‐shaped link between margin distance of controlling shareholders and stock returns for earnings communication conferences.

Suggested Citation

  • Wanlong Zhao & Wei Zhang & Xiong Xiong & Gaofeng Zou, 2019. "Share pledges, tone of earnings communication conferences, and market reaction: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 59(5), pages 2817-2853, December.
    • Handle: RePEc:bla:acctfi:v:59:y:2019:i:5:p:2817-2853
    DOI: 10.1111/acfi.12585
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    Cited by:

    1. Baochen Yang & Yifang Liu & Yunpeng Su, 2023. "Earnings communication conferences and post‐earnings‐announcement drift: Evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(2), pages 2145-2185, June.
    2. Zhou, Jingting & Li, Wanli & Yan, Ziqiao & Lyu, Huaili, 2021. "Controlling shareholder share pledging and stock price crash risk: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 77(C).
    3. Xiao, MingFang & Cao, June & Chiang, Yao-Min, 2022. "Kiss the baby for the nurse's sake? - Guaranteeing employees' stock purchase against loss program," International Review of Financial Analysis, Elsevier, vol. 81(C).

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