Do Political Connections Pay for Pledging of Shares: Evidence from India

Kousik Ganguly, Ajay Kumar Mishra and Bhavik Parikh
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Kousik Ganguly: Jindal Global Business School, O.P. Jindal Global University, Sonipat, Haryana, India
Ajay Kumar Mishra: Indian Institute of Technology (IIT) Kharagpur, West Bengal, India
Bhavik Parikh: Saint Francis Xavier University, Nova Scotia, Canada

American Business Review, 2026, vol. 29, issue 1, 235-263

Abstract: This study examines the stock-pledging behavior of promoters in politically connected Indian firms, using NSE-listed companies from 2009 to 2019. We investigate how capital raised through stock pledging affects investment in high-risk projects and assess the impact of margin call pressure. Results show that higher stock pledging reduces corporate investment; however, promoters with political ties are more inclined to pursue riskier projects. Moreover, politically connected firms exhibit lower stock return volatility, suggesting that political connections help shield these firms from both investment risk and return fluctuations.

Keywords: Political Connections; Stock Pledging; Margin Call Pressure; Volatility; Promoter; India (search for similar items in EconPapers)
JEL-codes: P00 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ris:ambsrv:022666

DOI: 10.37625/abr.29.1.235-263

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