Insiders Pledging and Stock Price Crash Risk

• Main Authors: Wei-Ting Peng, 彭暐庭
• Other Authors: 王泰昌
• Format: Others
• Language: zh-TW
• Published: 2017
• Online Access: http://ndltd.ncl.edu.tw/handle/e2ybjq

碩士 === 國立臺灣大學 === 會計學研究所 === 105 === Based on the crash risk research of Chen et al. (2001), this study examines the association between insiders pledging and stock price crash risk. This paper has two suggestions: First, insiders pledging can reduce the stock price crash risk. Once insiders pledge company stock as collateral for personal loans, stock price declines become more critical to them due to the risk of margin calls, resulting in a desire to reduce risk and avoid stock price declining. This effects should raise insiders’ risk-aversion and firms make more conservative investment decisions. By reducing the possibility of stock price declining, the companies have lower stock price crash risk. Second, considering the effect of the largest outside shareholders, they can compete with the insiders and support more risky but better investment decisions. Thus the companies increase the operating risk and have higher stock price crash risk. Using a sample of listed Taiwanese companies during 2005-2015, this study performs regression analyses and finds the empirical evidence consistent with the predictions above, finding that the companies have lower stock price crash risk with insiders pledging. Further, with insiders of companies pledging their stock, the likelihood of stock price crash risk is higher when the outside shareholders’ holding position increases.