TY - JOUR
T1 - Does share pledging affect firms' use of derivatives? Evidence from China
AU - Shen, Haomin
AU - Cheng, Xiaoke
AU - Ouyang, Caiyue
AU - Li, Ya
AU - Chan, Kam C.
N1 - Publisher Copyright:
© 2021 Elsevier B.V.
PY - 2022/3
Y1 - 2022/3
N2 - We investigate whether share pledging by controlling shareholders affects firms' use of derivatives. Our findings suggest that share-pledging firms are more likely to use derivatives than non-share-pledging firms. In cross-section analyses, we observe that the relationship is more pronounced when the margin call risk is higher, for example, if controlling shareholders own fewer shares, firms are located in regions with higher levels of marketization, or firms have a higher stock price crash risk. Our findings indicate that shares pledged by controlling shareholders steer firms toward the use of derivatives to hedge firm activities and alleviate the margin call risk.
AB - We investigate whether share pledging by controlling shareholders affects firms' use of derivatives. Our findings suggest that share-pledging firms are more likely to use derivatives than non-share-pledging firms. In cross-section analyses, we observe that the relationship is more pronounced when the margin call risk is higher, for example, if controlling shareholders own fewer shares, firms are located in regions with higher levels of marketization, or firms have a higher stock price crash risk. Our findings indicate that shares pledged by controlling shareholders steer firms toward the use of derivatives to hedge firm activities and alleviate the margin call risk.
KW - Derivatives use
KW - Margin call
KW - Share pledging
UR - http://www.scopus.com/inward/record.url?scp=85111482530&partnerID=8YFLogxK
U2 - 10.1016/j.ememar.2021.100841
DO - 10.1016/j.ememar.2021.100841
M3 - Article
AN - SCOPUS:85111482530
SN - 1566-0141
VL - 50
JO - Emerging Markets Review
JF - Emerging Markets Review
M1 - 100841
ER -