This study investigates the relationship between promoter share pledging and firm-level downside risk in Indian listed companies over the period 2009–2023. Using firm–year panel data from CMIE Prowess, the analysis examines both the incidence and intensity of promoter share pledging and their association with multiple measures of left-tail risk, including Conditional Value-at-Risk (CVaR), Value-at-Risk (VaR), maximum drawdown, minimum return, and crash-risk proxies (NCSKEW and DUVOL). The findings indicate that firms with pledged promoter shares exhibit significantly greater exposure to extreme negative return realizations compared to non-pledging firms. More importantly, the intensity of pledged shares is positively associated with incremental downside vulnerability, suggesting a dose–response relationship between collateral encumbrance and tail risk. These results remain robust after controlling for firm characteristics and year fixed effects. The evidence supports a collateral-amplification channel whereby equity-backed insider borrowing increases sensitivity to adverse price shocks. The study contributes to the governance and risk-management literature by linking promoter pledging to firm-level tail risk, highlighting its implications for investor protection and financial stability in ownership-concentrated emerging markets.

Keywords

Promoter share pledging; Downside risk; Conditional Value-at-Risk (CVaR); Crash risk; Corporate governance; Ownership concentration; Emerging markets; India.