Shareholder Wealth Consequences of Insider Pledging of Company Stock as Collateral for Personal Loans

• 成果类型: Article
• 署名作者: Dou, Ying; Masulis, Ronald W.; Zein, Jason
• 署名单位: Monash University; University of New South Wales Sydney
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhz034
• 发表日期: 2019
• 页码: 4810
• 关键词: debt; OWNERSHIP; cost

摘要

We study a widespread yet under-explored corporate governance phenomenon: the pledging of company stock by insiders as collateral for personal bank loans. Utilizing a regulatory change that exogenously decreases pledging, we document a negative causal impact of pledging on shareholder wealth. We study two channels that could explain this effect. First, we find that margin calls triggered by severe price falls exacerbate the crash risk of pledging firms. Second, since margin calls may cause insiders to suffer personal liquidity shocks or to forgo private benefits of control, we hypothesize and find that pledging is associated with reduced firm risk-taking.