ABSTRACT
We examine the impact of share pledging (SP) on management earnings forecasts (MEFs). Our findings suggest that an SP firm has more optimistic MEFs than a non-SP firm, suggesting that SP contributes to more optimistically biased MEFs. In addition, an SP firm is more likely to provide less specific MEFs than a non-SP firm. The results are robust to alternative measures of SP and MEFs and accounting for endogeneity. Additional analysis suggests that when the controlling shareholder has a high risk of losing control rights (the firm is located in a high marketization region or the stock has a high crash risk) or the corporate governance is poor, the impact of SP on optimistic MEFs and vague MEFs is magnified.
Acknowledgments
We acknowledge financial support from the National Natural Science Foundation of China (Grant No. 71562015), Educational Commission of Jiangxi Province (Grant No. GJJ170353), and Postdoctoral Science Foundation of China (Grant No. 2019M660443).
Notes
1. According to the Shanghai Stock Exchange Statistical Yearbook 2018 Volume, 99% of the stock market participants are retail investors, and institutional investors account for less than 1%. We have no a priori reasons to infer that the Shenzhen Stock Exchange is different.