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Institutional investor heterogeneity and systemic financial risk: Evidence from China

Author

Listed:
  • Huang, Wenli
  • Zhu, Yuanhao
  • Li, Shi
  • Xu, Yueling

Abstract

This paper explores the different effects of stress-resistant and stress-sensitive institutional investors on systemic financial risk in China. We show that systemic financial risk decreases with stress-resistant institutional shareholding but increase with stress-sensitive institutional shareholding. Two mediation mechanisms and two moderation mechanisms of analysts’ attention and stock price bubbles are identified. Specifically, the analysts’ attention presents a negative mediating effect and positive moderating effect between stress-resistant institutional shareholding and systemic financial risk, while stock price bubbles exhibit a negative mediating effect and positive moderating effect between stress-sensitive institutional shareholding and systemic financial risk. Our paper highlights the importance of appropriately guiding institutional investors to regulatory authorities, especially when institutional investors are encouraged to participate in Chinese stock markets.

Suggested Citation

  • Huang, Wenli & Zhu, Yuanhao & Li, Shi & Xu, Yueling, 2024. "Institutional investor heterogeneity and systemic financial risk: Evidence from China," Research in International Business and Finance, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:riibaf:v:68:y:2024:i:c:s027553192300288x
    DOI: 10.1016/j.ribaf.2023.102162
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    More about this item

    Keywords

    Institutional investors; Systemic financial risk; Analysts’ attention; Stock price bubbles;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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