Institutional investors, selling pressure and crash risk: Evidence from China

Yunqi Fan and Hui Fu

Emerging Markets Review, 2020, vol. 42, issue C

Abstract: Inconsistent with prior literature on the US stock market, our evidence shows the negative role of institutional investors who exacerbate subsequent crash risk in China. This is because institutional ownership amplifies the selling pressure in response to firm’s bad news, which in turn leads to higher stock price crash risk. The positive relation between institutional ownership and crash risk is more (less) pronounced for transient (dedicated) institutional investors, suggesting the selling pressure of short-term investors is heavier. Additionally, competition of institutional investors strengthens institutional selling pressure and hence exacerbates the effect of institutional ownership on crash risk.

Keywords: Selling pressure; Crash risk; Institutional investor type; Investor competition (search for similar items in EconPapers)
JEL-codes: G20 G32 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:42:y:2020:i:c:s1566014119302985

DOI: 10.1016/j.ememar.2019.100670

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