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Does Share Pledging Affect Management Earnings Forecasts?

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  • Xin Wang
  • Jiacai Xiong
  • Jitao Ou

Abstract

We examine the impact of share pledging (SP) on management earnings forecasts (MEFs). Our findings suggest that an SP firm has more optimistic MEFs than a non-SP firm, suggesting that SP contributes to more optimistically biased MEFs. In addition, an SP firm is more likely to provide less specific MEFs than a non-SP firm. The results are robust to alternative measures of SP and MEFs and accounting for endogeneity. Additional analysis suggests that when the controlling shareholder has a high risk of losing control rights (the firm is located in a high marketization region or the stock has a high crash risk) or the corporate governance is poor, the impact of SP on optimistic MEFs and vague MEFs is magnified.

Suggested Citation

  • Xin Wang & Jiacai Xiong & Jitao Ou, 2022. "Does Share Pledging Affect Management Earnings Forecasts?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(2), pages 512-524, January.
    • Handle: RePEc:mes:emfitr:v:58:y:2022:i:2:p:512-524
    DOI: 10.1080/1540496X.2020.1776695
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    Cited by:

    1. Zhang, Hao & Jin, Tian & Chen, Hanbin, 2023. "Do controlling shareholders collude with their related large shareholders? Evidence of equity pledges and shareholding increases from China," International Review of Financial Analysis, Elsevier, vol. 89(C).

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