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    Please use this identifier to cite or link to this item: http://tkuir.lib.tku.edu.tw:8080/dspace/handle/987654321/106620


    Title: Share Pledges and Margin Call Pressure
    Authors: Chan, Konan;Chen, Hung-Kun;Hu, Shing-yang;Liu, Yu-Jane
    Keywords: share pledges;margin call;repurchases;control right;controlling shareholders;opportunism
    Date: 2016-01-03
    Issue Date: 2016-04-27 11:18:54 (UTC+8)
    Abstract: 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 benefits. 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 opportunistic 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 greatly reduce the likelihood of firms to repurchase. Overall, our results shed light on the impact of share pledges on corporate decisions.
    Relation: 2016 American Finance Association Annual Meeting
    Appears in Collections:[財務金融學系暨研究所] 會議論文

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