Insider stock pledging and stock price informativeness: Evidence from India

Amanjot Singh

Review of Financial Economics, 2023, vol. 41, issue 1, 65-85

Abstract: Insiders’ shares can act as collateral while raising funds from lenders. This study examines the impact of insiders’ stock pledging activities on stock price informativeness using a sample of 1835 Indian firms. Our findings report that insider stock pledging increases the informational efficiency of stock prices. This informational efficiency increases for larger firms with: (1) financial constraints (high leverage and low cash holdings); (2) greater reliance on trade credit; and (3) higher indulgence in related party transactions. We also provide evidence on abnormal share turnover as a trading mechanism through which insider stock pledging is related to stock price informativeness. Our findings are robust across different specifications and after accounting for endogeneity issues.

Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/rfe.1161

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:41:y:2023:i:1:p:65-85

Access Statistics for this article

More articles in Review of Financial Economics from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().