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Institutional investors, selling pressure and crash risk: Evidence from China

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  • Fan, Yunqi
  • Fu, Hui

Abstract

Inconsistent with prior literature on the US stock market, our evidence shows the negative role of institutional investors who exacerbate subsequent crash risk in China. This is because institutional ownership amplifies the selling pressure in response to firm’s bad news, which in turn leads to higher stock price crash risk. The positive relation between institutional ownership and crash risk is more (less) pronounced for transient (dedicated) institutional investors, suggesting the selling pressure of short-term investors is heavier. Additionally, competition of institutional investors strengthens institutional selling pressure and hence exacerbates the effect of institutional ownership on crash risk.

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  • Fan, Yunqi & Fu, Hui, 2020. "Institutional investors, selling pressure and crash risk: Evidence from China," Emerging Markets Review, Elsevier, vol. 42(C).
    • Handle: RePEc:eee:ememar:v:42:y:2020:i:c:s1566014119302985
    DOI: 10.1016/j.ememar.2019.100670
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    More about this item

    Keywords

    Selling pressure; Crash risk; Institutional investor type; Investor competition;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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