Institutional investor horizons and stock price crash risk

Fanjie Fu, Jing Fang, Mei Yang and Shujie Yao

Research in International Business and Finance, 2024, vol. 72, issue PA

Abstract: This study examines how institutional investor investment horizons impact stock price crash risk for China’s A-share firms from 2007 to 2019. Long-term investments by institutions significantly mitigate risk by curbing managerial myopia, enhancing transparency, and improving accountability, thus deterring self-serving behavior. Moreover, long-term shareholding and professional investment indeed strengthen institutional investor supervision and corporate governance, reducing stock price crash risk. This paper also discusses institutional investor characteristics, such as herding behavior, information competition, and cliques, as well as external environmental factors, such as investor protection and external monitoring, on institutional investor horizons. Furthermore, effective internal governance, such as diversity of board sources and the diligence of audit committees, can amplify the risk reduction effects of long-term institutional investment.

Keywords: Institutional investor horizon; Stock price crash risk; Characteristics of institutional investors; External environmental factors; Supervision (search for similar items in EconPapers)
JEL-codes: G17 G30 M12 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:72:y:2024:i:pa:s0275531924003027

DOI: 10.1016/j.ribaf.2024.102509

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