Share pledging and firm performance: evidence from Thailand

This study examines the relationship between share pledging intensity in credit balance accounts and firm performance and risk among publicly listed companies in Thailand. Using a balanced panel dataset of all common stocks listed on the Stock Exchange of Thailand (SET) and the Market for Alternative Investment (mai) from December 2015 to December 2024, the analysis explores how pledging activity relates to firm outcomes across different firm sizes. Firm performance is measured using Return on Assets (ROA) and Tobin’s Q, while firm risk is assessed through cash flow volatility, stock return volatility, and idiosyncratic volatility. Employing fixed effects panel regression with firm-clustered standard errors, the findings reveal that share pledging intensity in credit balance accounts does not have a significant impact on ROA, Tobin’s Q, or cash flow volatility across any firm size group. However, higher pledging intensity is significantly associated with increased stock return volatility and idiosyncratic volatility in large-sized firms, suggesting that pledging may amplify market-driven and firm-specific risks in this group, possibly due to forced selling pressure. These results indicate that while share pledging intensity in credit balance accounts does not signal changes in firms’ core operations or strategic direction, it can influence market volatility, particularly among larger firms.