Conferences - Seminars
Why do CEOs pledge their own company's stock?
By Kornelia FABISIK (PhD candidate, SFI@EPFL)
Between 2007 and 2016, approximately 7.6% of U.S. firms disclosed that their CEOs had pledged company stock as collateral for a loan. On average, CEOs pledge 38% of their shares. The mean dollar value of margin loans is an economically sizeable $65 million. CEOs use the funds to either double down, hedge their ownership, or for purposes unrelated to changing their effective ownership. I find that the initiation of margin loans unrelated to ownership follows strong firm performance which continues afterwards. Firms with doubling-down CEOs do not outperform potential alternative investments.
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