Abstract:In this paper, we assess the economic impact of share pledging by focusing on corporate debt default risk, the most disruptive events in the life of a corporation. Using Instrumental Variables and a regulatory change that increasing the possibility of share pledging as a quasi-exogenous shock, we establish that increased share pledging decreases corporate default risk. The baseline results are robust by eliminating the effect of financial crises, adding other control variables, constructing new PSM samples and… Show more
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