Journal of Financial Stability Vol. 67 2023
Hastily announced: Mergers and acquisitions with pledging shareholders
Abstract
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.
- DOI
- 10.1016/j.jfs.2023.101159
- Volume
- 67
- Pages
- 101159
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib