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The effect of stock pledge on corporate fraudulence: Evidence from China

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  • Han, Han
  • Zhao, Xueqing
  • Wang, Zhibin

Abstract

This paper studies whether and how controlling shareholders’ stock pledge affects corporate fraudulence. We find that both the pledge behavior and the pledge ratio of the controlling shareholders are positively associated with future corporate fraudulence. The results are robust after addressing endogeneity issues by using PSM and IV approach. We then provide evidence that the increasing effect of stock pledge on fraudulence is probably due to the controlling shareholders’ fear of control transfer. Finally, we find that high media or investor attention can effectively weaken the positive effect of stock pledge on corporate fraudulence.

Suggested Citation

  • Han, Han & Zhao, Xueqing & Wang, Zhibin, 2023. "The effect of stock pledge on corporate fraudulence: Evidence from China," Finance Research Letters, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:finlet:v:57:y:2023:i:c:s1544612323005676
    DOI: 10.1016/j.frl.2023.104195
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    More about this item

    Keywords

    Stock pledge; Control transfer; Corporate fraudulence;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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