Collateral damage: Evidence from share pledging in China

DL Luo, ZR Piao, C Wu, FF Zhang

Research output: Contribution to journalJournal


This paper examines the effects of share pledging by controlling shareholders on tunneling. Using a sample of Chinese listed companies from 2004 to 2018, we find that share-pledging firms engage in more tunneling than non-share-pledging firms do. Our results are robust to alternative measures of tunneling, alternative estimation methods, and endogeneity checks using a difference-in-differences analysis. Moreover, we find that the positive association between share pledging and tunneling is more pronounced when firms' controlling shareholders have a stronger incentive to tunnel (e.g., firms with a greater wedge between cash flow rights and control rights) and when monitoring mechanisms are weak (e.g., firms with fewer analysts following or lower institutional holdings).
Original languageEnglish
Article number103187
Number of pages15
JournalInternational Review of Financial Analysis
Publication statusPublished - May 2024


  • Margin call
  • Share pledging
  • Tunneling

Indexed by

  • ABDC-A
  • SSCI


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