Share Pledges and Firms’ Systemic Risk Contribution : Evidence from Chinese Stock Market

Using the unbalanced data of 1714 listed firms between 2008 and 2019, this study investigates the impact of share pledging on the Chinese A-share market. Our findings show a positive relationship between share pledging and different measures of systemic risk, confirming that a higher level of share pledging is associated with a firm’s greater contribution to systemic risk in the stock market. By increasing firm risk and value and by reducing firm profitability and information disclosure, share pledging is positively related to systemic risk. We also find a less positive relationship between share pledging and systemic risk for state-owned enterprises, and after the implementation of new regulatory policies of share pledging, the positive effect of share pledging on systemic risk becomes less pronounced