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Institutional investor cliques and stock price efficiency: Evidence from China

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  • Guo, Xiaodong
  • Pang, Caiji
  • Qiao, Zheng
  • Yao, Xiangkun

Abstract

We investigate the impact of coordinating groups of institutional investors (cliques) on stock price efficiency in China. Employing the Louvain algorithm, we identify institutional investor cliques based on their holding networks and observe strongly correlated trading behaviors among clique members. Our baseline findings document that institutional investor clique ownership impedes stock price efficiency. We also provide a potential mechanism suggesting that this impediment effect arises from reduced information acquisition by clique members. Our additional analyses suggest that the inefficient stock prices induced by institutional cliques may exacerbate stock bubbles and increase the stock price crash risk.

Suggested Citation

  • Guo, Xiaodong & Pang, Caiji & Qiao, Zheng & Yao, Xiangkun, 2024. "Institutional investor cliques and stock price efficiency: Evidence from China," Journal of Financial Markets, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:finmar:v:71:y:2024:i:c:s1386418124000533
    DOI: 10.1016/j.finmar.2024.100935
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    More about this item

    Keywords

    Institutional investor; Coordination; Stock price efficiency;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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