Share pledging and stock price synchronicity: Evidence from China

Abstract

This paper examines the impact of share pledging on the incorporation of firm-specific information into stock prices, measured by stock price synchronicity. Using a comprehensive dataset of listed firms in China, we find that share pledging significantly increases the amount of firm-specific information reflected in stock prices. This effect is particularly pronounced in firms with lower transparency. Additionally, we explore the implications of share pledging and synchronicity for firm value. While stock price synchronicity is negatively associated with firm value, share pledging alone shows no direct relationship. However, in firms with lower stock price synchronicity, share pledging positively influences firm value.