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Institutional investor horizons and stock price crash risk

Author

Listed:
  • Fu, Fanjie
  • Fang, Jing
  • Yang, Mei
  • Yao, Shujie

Abstract

This study examines how institutional investor investment horizons impact stock price crash risk for China’s A-share firms from 2007 to 2019. Long-term investments by institutions significantly mitigate risk by curbing managerial myopia, enhancing transparency, and improving accountability, thus deterring self-serving behavior. Moreover, long-term shareholding and professional investment indeed strengthen institutional investor supervision and corporate governance, reducing stock price crash risk. This paper also discusses institutional investor characteristics, such as herding behavior, information competition, and cliques, as well as external environmental factors, such as investor protection and external monitoring, on institutional investor horizons. Furthermore, effective internal governance, such as diversity of board sources and the diligence of audit committees, can amplify the risk reduction effects of long-term institutional investment.

Suggested Citation

  • Fu, Fanjie & Fang, Jing & Yang, Mei & Yao, Shujie, 2024. "Institutional investor horizons and stock price crash risk," Research in International Business and Finance, Elsevier, vol. 72(PA).
    • Handle: RePEc:eee:riibaf:v:72:y:2024:i:pa:s0275531924003027
    DOI: 10.1016/j.ribaf.2024.102509
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    More about this item

    Keywords

    Institutional investor horizon; Stock price crash risk; Characteristics of institutional investors; External environmental factors; Supervision;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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