Pledging of Shares and Primary Shareholders: Antecedents to the Decision to Pledge

Working Papers
Bang, Nupur Pavan.,Bhatia, Nandil.,Ray, Sougata., Ramachandran, Kavil. "Pledging of Shares and Primary Shareholders: Antecedents to the Decision to Pledge", Singapore
Abstract:
While borrowing funds through share pledging (offering shares as collateral by primary shareholders to avail loans from financial institutions) is widespread in many institutional contexts, research on the causes and consequences of this corporate governance phenomenon is limited. We examine the influence of firm ownership (family or non-family), business group affiliation and size of business group on the decision to pledge shares. We find that business group affiliation and family ownership have a positive impact, while business group size has a negative impact on both likelihood and propensity to pledge shares in affiliates.