IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v90y2026ics1544612325026522.html

The impact of investor sentiment index on stock market crash risk: An analysis of the mediating effect of stock price synchronization

Author

Listed:
  • Zhao, Cui-Xia
  • Li, Yan

Abstract

This paper explores the relationship among the investor sentiment index (ISI), stock price synchronization, and crash risk based on data from Chinese A-share listed companies from 2006 to 2023. The study finds a significant negative relationship between the ISI and crash risk, with stock price synchronization acting as a mediating factor between the two. Further analysis reveals that the cash flow ratio significantly moderates the relationship between the ISI and crash risk. Additionally, heterogeneity analysis shows that the impact of the ISI on crash risk differs between firms that hold bank shares and those that do not. Similarly, the effect of the ISI on crash risk varies in firms led by executives with a financial background compared to those without. This research provides a new perspective on understanding crash risk in financial markets and offers theoretical support for related policy-making.

Suggested Citation

  • Zhao, Cui-Xia & Li, Yan, 2026. "The impact of investor sentiment index on stock market crash risk: An analysis of the mediating effect of stock price synchronization," Finance Research Letters, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finlet:v:90:y:2026:i:c:s1544612325026522
    DOI: 10.1016/j.frl.2025.109403
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612325026522
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2025.109403?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Kung-Cheng Ho & Andreas karathanasopoulos & Chia Chun Lo & Xixi Shen, 2024. "Information disclosure ratings and stock price crash risk," Review of Quantitative Finance and Accounting, Springer, vol. 63(4), pages 1323-1348, November.
    2. Xiaoqiang Zhi & Zuming Kang, 2021. "Critical audit matters and stock price crash risk," Frontiers of Business Research in China, Springer, vol. 15(1), pages 1-25, December.
    3. Yousaf, Imran & Bejaoui, Azza & Ali, Shoaib & Li, Yanshuang, 2024. "Demystifying the dynamic relationship between news sentiment index and ESG stocks: Evidence from time-frequency wavelet analysis," International Review of Financial Analysis, Elsevier, vol. 96(PB).
    4. Lei Zhang & Chao Wang & Hong Yao, 2021. "Information Contagion and Stock Price Crash Risk," Mathematical Problems in Engineering, Hindawi, vol. 2021, pages 1-13, February.
    5. Jing Wu & Wei Liu, 2022. "Economic Policy Uncertainty, Investor Sentiment, and Stock Price Synchronisation: Evidence from China," Mathematical Problems in Engineering, Hindawi, vol. 2022, pages 1-8, July.
    6. Qian, Binsheng & Tan, Yusen, 2024. "Firm-specific investor sentiment and stock price informativeness," Finance Research Letters, Elsevier, vol. 66(C).
    7. Yunqi Fan & Fangzhao Zhou & Yunbi An & Jun Yang, 2021. "Investor Sentiment and Stock Price Crash Risk: Evidence from China," Global Economic Review, Taylor & Francis Journals, vol. 50(4), pages 310-339, October.
    8. Junru Zhang & Chen Cui & Chen Zheng & Grantley Taylor, 2025. "Artificial intelligence innovation and stock price crash risk," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 48(2), pages 503-543, June.
    9. Zijian Cheng & Zhangxin (Frank) Liu & Jiaxin Xie, 2022. "Reverse mergers and stock price crash risk: evidence from China," Journal of Accounting Literature, Emerald Group Publishing Limited, vol. 44(2/3), pages 192-227, October.
    10. Pei Yin Wong & Yee Peng Chow, 2023. "Macroeconomic uncertainty and stock price crash risk: the moderating roles of operating performance and investor sentiment," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 28(3), pages 233-265.
    11. Alireza Askarzadeh & Mostafa Kanaanitorshizi & Maryam Tabarhosseini & Dana Amiri, 2024. "International Diversification and Stock-Price Crash Risk," IJFS, MDPI, vol. 12(2), pages 1-17, May.
    12. Binghui Wu & Yuanman Cai & Mengjiao Zhang & Miaochao Chen, 2021. "Investor Sentiment and Stock Price Crash Risk in the Chinese Stock Market," Journal of Mathematics, Hindawi, vol. 2021, pages 1-10, December.
    13. Meng Ran & Zhenpeng Tang & Yuhang Chen & Zhiqi Wang, 2024. "Early warning of systemic risk in stock market based on EEMD-LSTM," PLOS ONE, Public Library of Science, vol. 19(5), pages 1-21, May.
    14. Fu, Junhui & Wu, Xiang & Liu, Yufang & Chen, Rongda, 2021. "Firm-specific investor sentiment and stock price crash risk," Finance Research Letters, Elsevier, vol. 38(C).
    15. repec:eme:jal000:jal-08-2022-0085 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bingxiang Li & Sidi Zhang, 2026. "Toward Suppliers' Green Innovation: The Role of Buyers' Environmental Information Disclosure," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 33(1), pages 1-17, January.
    2. Anna Rutkowska-Ziarko & Lesław Markowski, 2022. "Accounting and Market Risk Measures of Polish Energy Companies," Energies, MDPI, vol. 15(6), pages 1-21, March.
    3. Bouteska, Ahmed & Kabir Hassan, M. & Gider, Zeynullah & Bataineh, Hassan, 2024. "The role of investor sentiment and market belief in forecasting V-shaped disposition effect: Evidence from a Bayesian learning process with DSSW model," The North American Journal of Economics and Finance, Elsevier, vol. 71(C).
    4. Shi, Jinyan & Liu, Xu & Li, Yanxi & Yu, Conghui & Han, Yushan, 2022. "Does supply chain network centrality affect stock price crash risk? Evidence from Chinese listed manufacturing companies," International Review of Financial Analysis, Elsevier, vol. 80(C).
    5. Gaoshan Wang & Xiaomin Wang, 2025. "The Effect of News Photo Sentiment on Stock Price Crash Risk Based on Deep Learning Models," Computational Economics, Springer;Society for Computational Economics, vol. 65(5), pages 2679-2706, May.
    6. Xiao, Jihong & Chen, Xian & Li, Yang & Wen, Fenghua, 2022. "Oil price uncertainty and stock price crash risk: Evidence from China," Energy Economics, Elsevier, vol. 112(C).
    7. Yang, Junhua & He, Xing & Zhang, Menghao & Gao, Xinxiang & Gou, Congcong & Chen, Xilong, 2026. "Registration system reform and risk of stock price collapse: the mediating effect based on auditor reputation," Finance Research Letters, Elsevier, vol. 90(C).
    8. Su, Shiwei & Jia, Songbo & Shi, Guangping, 2023. "Leverage adjustment behaviors and stock price crash risk," Finance Research Letters, Elsevier, vol. 56(C).
    9. Ahmed Bouteska & Taimur Sharif & Mohammad Zoynul Abedin, 2024. "Does investor sentiment create value for asset pricing? An empirical investigation of the KOSPI‐listed firms," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 3487-3509, July.
    10. Li, Fangzhou & Jiang, Yuxiang, 2022. "Institutional investor networks and crash risk: Evidence from China," Finance Research Letters, Elsevier, vol. 47(PA).
    11. Nguyen, Thu Ha & Lan, Yihui & Treepongkaruna, Sirimon & Zhong, Rui, 2023. "Credit rating downgrades and stock price crash risk: International evidence," Finance Research Letters, Elsevier, vol. 55(PB).
    12. Dongxue Wang & Yugang He, 2025. "Navigating Structural Shocks: Bayesian Dynamic Stochastic General Equilibrium Approaches to Forecasting Macroeconomic Stability," Mathematics, MDPI, vol. 13(14), pages 1-25, July.
    13. Romlah Jaffar & Nor Asyiqin Abu & Mohamat Sabri Hassan & Mohd Mohid Rahmat, 2023. "Value Relevance of Board Attributes: The Mediating Role of Key Audit Matter," IJFS, MDPI, vol. 11(1), pages 1-21, February.
    14. Minghua Dong & Miaomiao Li & Hongxia Wang & Yuanyuan Pang, 2025. "ESG Disagreement and Stock Price Crash Risk: Evidence from China," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 32(1), pages 267-299, March.
    15. Ming Hung Lin & Mohammad Sassani & Navid Golchin & Yeganeh Jabbari & Zulxumorxon Boymatova & Jabbarov Umarbek Rustambekovich & Yuldoshev Jushkinbek Erkaboy Ugli & Saodat Atajanova & Yakitjon Turdiyeva, 2025. "Optimal Planning and Operation of the Smart Electrical Distribution Network Considering Stochastic Optimization Modeling and Energy Storage Systems," SN Operations Research Forum, Springer, vol. 6(3), pages 1-22, September.
    16. Duan, Jiangjiao & Lin, Jingjing, 2023. "The impact of COVID-19 on the crash risk of registered new shares in China," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    17. Huang, Li & Jiang, Xiandeng, 2025. "Risk-taking in gambling cultures and social security contributions – evidence from Chinese small and micro enterprises," Pacific-Basin Finance Journal, Elsevier, vol. 91(C).
    18. Chen, Yuyang & Zhu, Shuyi, 2025. "Integrity atmosphere and the cost of equity: Evidence from China," Emerging Markets Review, Elsevier, vol. 68(C).
    19. Xiao, Lingmin & Zhao, Liang & Zhu, Qianyu, 2024. "Host country economic policy uncertainty, trade openness and Chinese enterprise overseas investment," International Review of Economics & Finance, Elsevier, vol. 96(PA).
    20. Zuo, Jingjing & Qiu, Baoyin & Zhu, Guoyiming & Lei, Guangyong, 2023. "Local speculative culture and stock price crash risk," Research in International Business and Finance, Elsevier, vol. 64(C).

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:90:y:2026:i:c:s1544612325026522. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.