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Heterogeneous Institutional Investors, Short Selling and Stock Price Crash Risk: Evidence from China

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  • Fenghua Wen
  • Longhao Xu
  • Bin Chen
  • Xiaohua Xia
  • Jinyi Li

Abstract

This study investigates the relation between heterogeneous institutional investors and stock price crash risk, then explores the effect of short selling on the relationship. By using a dataset of 1064 firms from China for the 2007–2015 period, we find that different from the developed countries, in China both grey and independent institutional investors have positive effects on the stock price crash risk. Moreover, we also discover that for firms without short selling ban, positive correlation between grey institutional investors and stock price crash risk is weaker, while the relationship between independent institutional investors and the crash risk is not affected.

Suggested Citation

  • Fenghua Wen & Longhao Xu & Bin Chen & Xiaohua Xia & Jinyi Li, 2020. "Heterogeneous Institutional Investors, Short Selling and Stock Price Crash Risk: Evidence from China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(12), pages 2812-2825, September.
    • Handle: RePEc:mes:emfitr:v:56:y:2020:i:12:p:2812-2825
    DOI: 10.1080/1540496X.2018.1522588
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    Citations

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    Cited by:

    1. Hou, Canran & Liu, Huan, 2023. "Institutional cross-ownership and stock price crash risk," Research in International Business and Finance, Elsevier, vol. 65(C).
    2. Cao, Jiahui & Wen, Fenghua & Zhang, Yue & Yin, Zhujia & Zhang, Yun, 2022. "Idiosyncratic volatility and stock price crash risk: Evidence from china," Finance Research Letters, Elsevier, vol. 44(C).
    3. Xufeng Liu & Die Wan, 2022. "Does short‐selling affect mutual fund shareholdings? Evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1887-1923, April.
    4. Yao, Shouyu & Pan, Yuying & Sensoy, Ahmet & Uddin, Gazi Salah & Cheng, Feiyang, 2021. "Green credit policy and firm performance: What we learn from China," Energy Economics, Elsevier, vol. 101(C).
    5. Ren, Xiaohang & Wang, Rui & Duan, Kun & Chen, Jinyu, 2022. "Dynamics of the sheltering role of Bitcoin against crude oil market crash with varying severity of the COVID-19: A comparison with gold," Research in International Business and Finance, Elsevier, vol. 62(C).
    6. Cao, Jie & Wen, Fenghua & Stanley, H. Eugene & Wang, Xiong, 2021. "Multilayer financial networks and systemic importance: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 78(C).
    7. Wen, Fenghua & Cao, Jiahui & Liu, Zhen & Wang, Xiong, 2021. "Dynamic volatility spillovers and investment strategies between the Chinese stock market and commodity markets," International Review of Financial Analysis, Elsevier, vol. 76(C).
    8. He, Zhifang, 2022. "Asymmetric impacts of individual investor sentiment on the time-varying risk-return relation in stock market," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 177-194.
    9. Zhao, Mengyang & Zhang, Lingxiao, 2023. "Foreign ownership, heterogeneous beliefs, and stock market volatility," Finance Research Letters, Elsevier, vol. 55(PA).
    10. Zheng, Yan & Zhou, Min & Wen, Fenghua, 2021. "Asymmetric effects of oil shocks on carbon allowance price: Evidence from China," Energy Economics, Elsevier, vol. 97(C).

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