Utilizing a hand-collected comprehensive dataset covering U.S. public traded firms from 2006 to 2014, we present descriptive evidence regarding insider pledging behavior in the U.S. and study its determinants. We find an insider’s propensity to pledge company stock is positively associated with her risk exposure and pledgeability of company stock, and negatively with the company’s corporate governance quality. These findings suggest that risk-averse corporate insiders pledge to hedge. Further, we find ISS’s denouncement of pledging in 2012 reduces insider pledging.

This study examines how controlling shareholders’ pledging behavior influences firms’ acquisition decisions. Employing a sample of Chinese listed firms from 2010 to 2018, we find that firms with pledging controlling shareholders are more likely to announce merger and acquisition (M&A) deals than firms with non-pledging shareholders. The positive relationship between share pledging and M&A announcements is more pronounced when the margin call pressure is higher. We show that the link between share pledging and M&As is best explained by the controlling shareholders’ fear of losing control, and is unlikely due to shareholder expropriation or optimism. Further analyses indicate that pledge-related acquisitions are associated with a lower success rate, longer trading suspension periods, and smaller (yet positive) market returns.