ABSTRACT
This paper tests the superimposed negative market reaction of listed companies with high-level share pledging by controlling shareholders to the coronavirus disease 2019 (COVID-19) pandemic and finds that it is alleviated in the pharmaceutical industry and when the share pledge funds are obtained from a brokerage firm or flow back to the listed companies. Furthermore, a low-quality information environment exacerbates the negative reaction, while high-level research and development (R&D) investment and free cash flow alleviate it. A possible mechanism underlying the results is that the “gray rhino” erodes the company’s operating efficiency. This paper provides timely and direct evidence regarding the capital market’s response to COVID-19.
Acknowledgments
This work was supported by National Natural Science Foundation of China (72061147005, 71802206, 71874215, 71571191, 72004244), the framework of international cooperation program managed by the National Research Foundation of Korea (2020K2A9A2A1110432911, FY2020), Humanity and Social Science Youth foundation of Ministry of Education (18YJC630262), the Fundamental Research Funds for the Central Universities (QL18005), the 2020 emergency project “China Financial Security under the Impact of the COVID-19” of the Beijing’s advanced subject “Financial Security Engineering”, Beijing Natural Science Foundation (9182016, 9194031), Beijing Social Science Foundation (18JDGLB022), Beijing Double World-classes Development Plan (Personalized content aggregation, presentation and application research on cross-Media Big Data) and Program for Innovation Research in Central University of Finance and Economics.