We examine how personal shares pledged by controlling shareholders affect corporate share repurchase decisions. Shares pledged create a margin call pressure for controlling shareholders who might use repurchase to protect their control rights. Using Taiwan's data, we find evidence that high pledge companies are more likely to repurchase, especially after a significant drop in share prices. Investors perceive this incentive and the announcement effect is negatively related to shares pledged. We also provide evidence that companies suffer less such problem if there are large outside blockholders.
關聯:
2013 Financial Management Association Annual Meeting, 44p.
