https://scholars.lib.ntu.edu.tw/handle/123456789/414561
Title: | Share pledges and margin call pressure | Authors: | Chan, Konan Chen, Hung Kun SHING-YANG HU Liu, Yu Jane |
Keywords: | Control right | Controlling shareholders | Margin call | Repurchases | Self-serving | Share pledges | Issue Date: | 1-Oct-2018 | Publisher: | ELSEVIER SCIENCE BV | Journal Volume: | 52 | Start page/Pages: | 96 | Source: | Journal of Corporate Finance | Abstract: | © 2018 It is common practice worldwide for corporate insiders to put up stock as collateral for personal loans. We highlight a potential problem in such pledging. When controlling shareholders face a margin call threat if stock prices fall below the required level for a loan, they have an incentive to use corporate resources for their private benefit. We develop and test a margin call hypothesis that controlling shareholders may initiate share repurchases to fend off potential margin calls associated with pledged stocks in order to maintain their control rights. Investors seem to recognize such behavior and discount the potential benefits of repurchase programs. However, share pledges are not reliably related to repurchases when control rights are not a concern. We further show that regulatory restrictions of control rights on pledging effectively reduce the likelihood of firms’ repurchasing. Overall, our results shed light on the impact of share pledges on corporate decisions. |
URI: | https://scholars.lib.ntu.edu.tw/handle/123456789/414561 https://www.scopus.com/inward/record.uri?eid=2-s2.0-85051410487&doi=10.1016%2fj.jcorpfin.2018.08.003&partnerID=40&md5=8e01e18fd7ef07d8b6043fb8c627ab1d |
ISSN: | 09291199 | DOI: | https://api.elsevier.com/content/abstract/scopus_id/85051410487 10.1016/j.jcorpfin.2018.08.003 |
Appears in Collections: | 財務金融學系 |
Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.