Foreign investors and stock price crash risk: Evidence from China

Zhi-xiong Huang, Qi Tang and Siming Huang

Economic Analysis and Policy, 2020, vol. 68, issue C, 210-223

Abstract: This study examines whether and how foreign investors affect firm-specific crash risk. Based on China’s stock market, we show that foreign investors significantly increase stock price crash risk and the positive association is more pronounced in firms with high levels of information asymmetry or efficient internal control. We address endogeneity issue using a quasi-natural experiment, namely, the revision of Foreign Investment Industrial Guidance Catalog in 2011, and results still hold. Overall, this study provides policy implications on the effect of foreign investor in emerging capital markets.

Keywords: Foreign investors; Stock price crash risk; Information asymmetry; Internal control (search for similar items in EconPapers)
JEL-codes: G14 G23 G28 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:68:y:2020:i:c:p:210-223

DOI: 10.1016/j.eap.2020.09.016

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