The Impact of Institutional Shareholdings on Price Limits

Manhwa Wu, Paoyu Huang and Yensen Ni ()
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Manhwa Wu: Ming Chuan University
Paoyu Huang: Soochow University
Yensen Ni: Tamkang University

Asia-Pacific Financial Markets, 2020, vol. 27, issue 3, No 2, 343-361

Abstract: Abstract We explore whether institutional shareholders would affect the price limits in Taiwan due to that the price limit system in Taiwan is lower than those of other countries. In this study, We reveal that various institutional shareholding ratios including domestic institutional shareholding ratio and foreign institutional shareholding ratio significantly affect several stock limit ratios including the stock limit ratio, stock price up-limit ratio, and stock price down-limit ratio rarely concerned comprehensively in the relevant studies. In addition, we argue that our interesting findings are likely interpreted as follows: First, domestic institutions might buy stocks to price up-limit to improve their performance. Second, institutional investors might beat their competitors by selling competitors’ stocks to price down-limits. Third, foreign institutions might sell stocks to price down-limits after taking many short positions in index futures. We deduce that the Taiwan price limit system might provide opportunities for institutional investors, stakeholders, and even insiders to manipulate share prices because the price limit likely occurs in Taiwan Stock Exchange.

Keywords: Board structure; Price limits; Institutional shareholdings (search for similar items in EconPapers)
JEL-codes: G30 G32 G38 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10690-019-09296-y

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