 Share pledge and stock repurchase: The role of stock mispricing and corporate governanceYi-Wen Chen, Xing-Yu Pan, Chu-Bin Lin and Chun-Hua Yang Pacific-Basin Finance Journal, 2024, vol. 88, issue C Abstract: Prior research documents a positive relation between controlling shareholders' share pledge and the probability of a stock repurchase announcement. This study investigates whether and how stock mispricing and corporate governance affect this relation. By extending the framework of Chan et al. (2018), we first show that the share pledge is not only positively related to the probability of stock repurchase but also proportionally related to the amount purchased. Moreover, for firms with shares pledged by controlling shareholders, stock overpricing and better firm-level corporate governance are associated with a lower probability of stock repurchase and less amount of stock repurchase. Additional tests show that large shareholders (not only the largest) facilitate stock repurchase once they have shares pledged. Our evidence supports the market timing theory and that better corporate governance moderates the agency problem between controlling and small shareholders. Keywords: Corporate governance; Share pledge; Stock mispricing; Stock repurchase (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:88:y:2024:i:c:s0927538x24003135 DOI: 10.1016/j.pacfin.2024.102561 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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