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Share pledges, tone of earnings communication conferences, and market reaction: evidence from China
Author(s) -
Zhao Wanlong,
Zhang Wei,
Xiong Xiong,
Zou Gaofeng
Publication year - 2019
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12585
Subject(s) - pledge , shareholder , earnings , monetary economics , business , china , stock (firearms) , tone (literature) , stock market , share price , accounting , economics , finance , stock exchange , corporate governance , engineering , mechanical engineering , art , paleontology , literature , horse , political science , law , biology
We investigate how share pledging affects firms’ disclosures and influences investors in Chinese stock market. The tone of firm disclosures when there are shares pledged by controlling shareholders is more positive than that of firms without them. Considering tone inflation motivation and ability simultaneously, we find share pledge risk has an inverted U‐shaped relation with tone. Investors react positively to tone in short‐run windows, and firms with controlling shareholders’ pledges have higher stock returns for earnings communication conferences. We identify an inverted U‐shaped link between margin distance of controlling shareholders and stock returns for earnings communication conferences.