 Market stabilization fund and stock price crash risk: Evidence from the post-crash periodMinchen Zhu, Dayong Lv and Wenfeng Wu Journal of Economic Dynamics and Control, 2022, vol. 139, issue C Abstract: As market stabilization funds (MSFs) are usually established to stabilize a short-term stock market disaster, most of them will “retreat” after crashes. However, there is an exception, i.e., the Chinese MSFs, which still purchase and hold a large number of shares even after the stock market crash. This paper concentrates on the trading behavior of the Chinese MSFs in a post-crash period by investigating the association between MSFs holding and future stock price crash risk. We show that, during the post-crash period, stocks held by MSFs experience significantly lower future crash risk than those un-held by MSFs in the short run. Moreover, this negative association cannot be explained by the “trading channel,” “signaling channel,” or “monitoring channel.” Our findings corroborate that the Chinese MSFs, which manage massive resources from taxpayers, are capable of detecting stocks with lower future crash risk. Keywords: Market stabilization fund; Stock price crash risk; Stock-picking ability; Institutional investor; China (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:139:y:2022:i:c:s0165188922001385 DOI: 10.1016/j.jedc.2022.104433 Access Statistics for this article Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok More articles in Journal of Economic Dynamics and Control from Elsevier |
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