Linkages between share pledging, stock price risk and profitability: Evidence from the P.R. China

Share pledging has become popular as a method of loan collateral among Chinese shareholders. Our research used a sample of Chinese listed firms between 2008–2018 and produced two main findings. Firstly, we found a negative association between stock price risk and firm profitability. Our second findi...

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Autores principales:	Fengchao Li, Xing Zhang, Jaime Ortiz
Formato:	article
Lenguaje:	EN
Publicado:	Public Library of Science (PLoS) 2021
Materias:	Medicine R Science Q
Acceso en línea:	https://doaj.org/article/4344ac268191487e924cd53178c76e4f
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spelling	oai:doaj.org-article:4344ac268191487e924cd53178c76e4f2021-11-25T06:19:39ZLinkages between share pledging, stock price risk and profitability: Evidence from the P.R. China1932-6203https://doaj.org/article/4344ac268191487e924cd53178c76e4f2021-01-01T00:00:00Zhttps://www.ncbi.nlm.nih.gov/pmc/articles/PMC8601517/?tool=EBIhttps://doaj.org/toc/1932-6203Share pledging has become popular as a method of loan collateral among Chinese shareholders. Our research used a sample of Chinese listed firms between 2008–2018 and produced two main findings. Firstly, we found a negative association between stock price risk and firm profitability. Our second finding was that the interaction effect of share pledging and stock price risk is greater on firm profitability than the effect of stock price risk itself. We examined the role of share pledging by modeling pooled OLS and fixed effects using share pledging behavior, controlling shareholders’ share pledging and the share pledging ratio to reinforce the robustness of our results. Furthermore, we investigated the Davis Double Play effect of share pledging to analyze how share pledging affects stock price risk. We found that higher EPS and investor expectations cannot mitigate the positive impact of share pledging on stock price risk. That is, the reduction of EPS and the deterioration of investor expectations caused by share pledging risk will not further aggravate the stock price risk, as shareholders may have taken some managerial actions to affect the transmission mechanism.Fengchao LiXing ZhangJaime OrtizPublic Library of Science (PLoS)articleMedicineRScienceQENPLoS ONE, Vol 16, Iss 11 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	Medicine R Science Q
spellingShingle	Medicine R Science Q Fengchao Li Xing Zhang Jaime Ortiz Linkages between share pledging, stock price risk and profitability: Evidence from the P.R. China
description	Share pledging has become popular as a method of loan collateral among Chinese shareholders. Our research used a sample of Chinese listed firms between 2008–2018 and produced two main findings. Firstly, we found a negative association between stock price risk and firm profitability. Our second finding was that the interaction effect of share pledging and stock price risk is greater on firm profitability than the effect of stock price risk itself. We examined the role of share pledging by modeling pooled OLS and fixed effects using share pledging behavior, controlling shareholders’ share pledging and the share pledging ratio to reinforce the robustness of our results. Furthermore, we investigated the Davis Double Play effect of share pledging to analyze how share pledging affects stock price risk. We found that higher EPS and investor expectations cannot mitigate the positive impact of share pledging on stock price risk. That is, the reduction of EPS and the deterioration of investor expectations caused by share pledging risk will not further aggravate the stock price risk, as shareholders may have taken some managerial actions to affect the transmission mechanism.
format	article
author	Fengchao Li Xing Zhang Jaime Ortiz
author_facet	Fengchao Li Xing Zhang Jaime Ortiz
author_sort	Fengchao Li
title	Linkages between share pledging, stock price risk and profitability: Evidence from the P.R. China
title_short	Linkages between share pledging, stock price risk and profitability: Evidence from the P.R. China
title_full	Linkages between share pledging, stock price risk and profitability: Evidence from the P.R. China
title_fullStr	Linkages between share pledging, stock price risk and profitability: Evidence from the P.R. China
title_full_unstemmed	Linkages between share pledging, stock price risk and profitability: Evidence from the P.R. China
title_sort	linkages between share pledging, stock price risk and profitability: evidence from the p.r. china
publisher	Public Library of Science (PLoS)
publishDate	2021
url	https://doaj.org/article/4344ac268191487e924cd53178c76e4f
work_keys_str_mv	AT fengchaoli linkagesbetweensharepledgingstockpriceriskandprofitabilityevidencefromtheprchina AT xingzhang linkagesbetweensharepledgingstockpriceriskandprofitabilityevidencefromtheprchina AT jaimeortiz linkagesbetweensharepledgingstockpriceriskandprofitabilityevidencefromtheprchina
_version_	1718413859210919936

Linkages between share pledging, stock price risk and profitability: Evidence from the P.R. China

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