9783 
4657This paper investigates the effect of major shareholders’ share pledging on the illegal actions of information disclosure. We find that illegal actions of information disclosure are more likely to occur during the period of major shareholders’ share pledging. Compared with non-share pledging companies, the probability of illegal actions of information disclosure of share pledging companies increases by 15.4%.This finding shows that major shareholders have the incentive to increase the tendency of corporate information disclosure violations and reduce information transparency to avoid the threat of losing control right. However, the external supervision and governance mechanism can constrain the opportunistic behavior of major shareholders during the period of share pledging. Short-selling pressure and institutional investor share-holding can significantly reduce the probability of illegal actions of information disclosure among the share pledging companies. Further research shows that, the effect of share pledging to illegal actions on information disclosure is more evident in the sample of companies hiding bad news, which means it is possible for major shareholders to hide the bad news in opportunistic behaviors so as to diminish the stock price crash’s threat to the control right, leading to a higher rate of illegal actions of information disclosure.
This paper shows that major shareholders have the motivation to use disclosure methods to meet the demand of market value management. And the probability of illegal actions of information disclosure listed firms is increased under this pressure. This paper enriches the research on the economic consequences of the period of major shareholders’ share pledging, and the conclusions have important policy implications for regulators and investors.
