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The information advantage of industry common owners and its spillover effect on stock price crash risk

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  • Li, Qingyuan
  • Ni, Xiaoran
  • Yeung, P. Eric
  • Yin, David

Abstract

Blockholding multiple firms within an industry generates an information advantage for institutional investors, who can better differentiate between the industry-wide and firm-specific nature of bad news released by peer firms and avoid selling on false spillover signals (i.e., “smart exit”). Empirically, we document that industry common ownership reduces future firm-level stock price crash risk. Our results can be explained by the attenuated spillover from industry peers' firm-specific bad news, as a complement to the monitoring effect that reduces the focal firm's hoarding of bad news. Our results suggest that the presence of industry common owners provides a stabilizing effect against stock price contagion.

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  • Li, Qingyuan & Ni, Xiaoran & Yeung, P. Eric & Yin, David, 2025. "The information advantage of industry common owners and its spillover effect on stock price crash risk," Journal of Corporate Finance, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:corfin:v:92:y:2025:i:c:s092911992500032x
    DOI: 10.1016/j.jcorpfin.2025.102764
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