Plausibly Exogenous [1100] - Stock Pledge Restriction (02/04/2023)
LHS Variable
Investment efficiency
RHS Variable
Stock pledge restriction (SPR)
Source of Exogenous Variation
On January 12, 2018, the Securities Commission of China approves and issues the "Notice on the Issuance of The Measures for Stock Pledge Repurchase Transactions, Registration and Settlement Business (2018 Amendment)".2 Compared with the previous regulation, the new regulation limits the proportion of stock pledge and the use of funds. The new regulation requires the overall pledge of shares of listed firms shall not exceed 50% of total share capital, the pledged shares value accounted for the proportion of the total market value should not exceed 60%, and requires the pledge funds can only be used for the production and business operation entity economy, avoid internal idle funds in the financial system, further amplify risk.
- Huang, Li, and Zhao (2022), “Stock pledge restrictions and investment efficiency”