Share pledge and accounting conservatism in share-pledging firms: Evidence from a natural experiment in China
Xin Wang,
Yue Sun,
Yanlin Li
et al.
Abstract:This paper focuses on firms in which insiders pledge their shares as collateral for loans. By investigating a natural experiment—China’s enactment of provisions on share reductions that restrict pledge creditors’ cashing-out behavior—we find that pledging firms exhibited more conservative financial reporting after the implementation than non-pledging firms. This effect was pronounced in firms with a higher ratio of pledged shares, a longer maturation period of the pledged shares, and more concentrated pledge c… Show more
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