We investigate how a firm’s corporate pledgeable asset ownership (CPAO) affects its risk of a future stock price crash. Using pledgeable asset ownership and crash risk data for a largesample of US firms, we provide novel empirical evidence that a firm’s risk of a future stock price crash decreases as its pledgeable assets increase. Our main finding remains valid after various robustness tests (change analysis, propensity score matching, and coefficient stability tests). Further analysis shows that the effect of a firm’s CPAO on its risk of a future stock price crash disappears during a financial crisis. These results show that having greater pledgeable assets enables easier access to external financing, making it less likely that managers will hoard bad news.

Keywords: Asset pledgeability, Stock price crash risk, Financial crisis, Endogeneity tests
JEL Classification: G30, G33, R30​