Share lockup expiration of major shareholder, tone management and share pledges: empirical evidence from China

Purpose - The major shareholders may try to manipulate the stock price for tunneling after share lockup expiration, but the earlier studies focus on earnings management and do not consider other potential manipulation methods. Therefore, we explore the tone management of earnings communication conferences. Design/methodology/approach - We take the China A-share listed companies in Shanghai and Shenzhen Stock Exchanges from 2007 to 2021 as our sample to examine how, why and when share lockup expiration of major shareholders affects tone management of earnings communication conference. Findings - Firms tend to engage in tone management in earnings communication conferences when the lockup expires by increasing the optimism of the tone and decreasing the similarity between the responses and questions. The purpose of tone management is not for share reduction, but rather for improving market performance and better share pledge. The effect of share lockup expiration is weaker when the firm engages in real or accrual-based earnings management, and when the firm keeps higher accounting conservatism. In addition, in companies at growth and maturity stages, where executive compensation is high, institutional investor ownership is low and the controlling shareholder is a non-state-owned enterprise, the impact of share lockup expiration on the tone management becomes more pronounced. Originality/value - Our study reveals the ways and purposes of tone management when share lockup expires, shows the timing preferences of tone management and helps identify the quality of information disclosure in earnings communication conferences, enriching the research on tone management and market value management.