Institutional investor inattention and stock price crash risk

Cheng Xiang, Fengwen Chen and Qian Wang

Finance Research Letters, 2020, vol. 33, issue C

Abstract: We find that firms suffer from larger future stock price crash risk if their institutional investors are more distracted by exogenous attention-grabbing events, and therefore are more inattentive to these firms. This effect is more pronounced for state-owned-enterprises, for firms whose CEOs chair the boards, and firms with less analyst coverage. Further tests show that this effect is mainly caused by the inattention of dedicated institutional investors and quasi-indexers but not by that of transient institutional investors, and is partially attributed to the finding that managers hoard more bad news through more earnings management when institutional investors are more inattentive.

Keywords: Institutional investor inattention; Stock price crash risk; Bad news hoarding; Earnings management (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:33:y:2020:i:c:s1544612319301084

DOI: 10.1016/j.frl.2019.05.002

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