Share pledging and corporate misconduct

Lawrence Kryzanowski, Mingyang Li, Sheng Xu and Jie Zhang

The British Accounting Review, 2025, vol. 57, issue 3

Abstract: We investigate and find a significant and positive relation between share pledging by controlling shareholders and the likelihood of corporate misconduct. The results remain robust after classifying misconduct into accounting and non-accounting misconduct, and misconduct receiving severe and light penalties. Alleviation of financial constraints, inflation of stock prices, mitigation of margin calls, and expropriation under poor corporate governance are the main motives for corporate misconduct by firms with pledging controlling shareholders. The positive relation between share pledging and corporate misconduct propensity remains after accounting for endogeneity issues, political connections, intensified bank monitoring, and share repurchasers.

Keywords: Corporate misconduct; Share pledging; Controlling shareholders; Pledging deregulation (search for similar items in EconPapers)
JEL-codes: G15 G30 G38 K22 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:bracre:v:57:y:2025:i:3:s0890838924002889

DOI: 10.1016/j.bar.2024.101508

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