Are share pledge firms more willing to repurchase shares? evidence from China
Abstract
This thesis investigates whether Chinese share pledge firms are more willing to repurchase shares by using a sample of Chinese A-share share repurchases from October 27, 2018, to December 31, 2023. The research indicates that companies with share pledges have a higher propensity to announce larger-scale share repurchases initially but no relationship with actively complete the repurchase plans following the new repurchase system of China. This tendency is observed in both the non-state-owned enterprises (non-SOEs) and lower shareholding ratio of the largest shareholders companies, which are at greater risk of the transfer of control. Moreover, the market reaction to the repurchases of share pledge firms is not as favorable as none share pledge firms, especially for the company under the pressure of share pledge cannot obtain the cumulative abnormal return of repurchase, suggesting that investors appear to be aware of companies using share repurchases to ease the share pledge crisis and discount the potential benefits of repurchase programs. Overall, this research highlights the risks associated with share pledging, especially the risk of the transfer of control, and how these risks influence corporate decisions regarding share repurchases.
Description
Masteroppgave(MSc) in Master of Science in Business, Accounting and Business Control - Handelshøyskolen BI, 2024