Stock price synchronicity, crash risk, and institutional investors

Heng An and Ting Zhang

Journal of Corporate Finance, 2013, vol. 21, issue C, 1-15

Abstract: Both stock price synchronicity and crash risk are negatively related to the firm's ownership by dedicated institutional investors, which have strong incentive to monitor due to their large stake holdings and long investment horizons. In contrast, the relations become positive for transient institutional investors as they tend to trade rather than monitor. These findings suggest that institutional monitoring limits managers' extraction of the firm's cash flows, which reduces the firm-specific risk absorbed by managers, thereby leading to a lower R2. Moreover, institutional monitoring mitigates managerial bad-news hoarding, which results in a stock price crash when the accumulated bad news is finally released.

Keywords: Agency problem; Institutional monitoring; Crash risk; Stock price synchronicity (search for similar items in EconPapers)
JEL-codes: G2 G3 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (228)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119913000023
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:21:y:2013:i:c:p:1-15

DOI: 10.1016/j.jcorpfin.2013.01.001

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().