On The Combination Of Industry And Finance,Its Motivations And Their Impacts On The Risks Of Stock Price Crash

The term "combination of industry and finance" in this paper refers to the investment activities that the industrial businesses hold the shares of financial institutions so as to penetrate into the financial field.It can also be called as "the listed companies involving in holding financial institutions".Such activities have been popular more and more with the businesses in recent years.Among the non-financial listed companies in the A-share market of Shanghai Exchange and Shenzhen Exchange,the sample of companies involved with CIF had reached about 10%from 2006 to 2016The CIF,with its many advantages,is the product of the development of market economy to a certain stage.However,as the laws and regulations of China's financial supervision are still to be improved,the financial deleveraging and systematic risk prevention are still ongoing,the emerging CIF has brought some new problems.For example,some businesses take advantage of financial regulatory loopholes to carry out institutional arbitrage through the CIF,some increase the loans by an explicit leverage though CIF,some amplify the amount of equity mortgage by an implicit leverage through the CIF,and some conspire with financial institutions to hype the stock price to entrap small and medium-sized investors,etc.,which,on the contrary,enhance the financial leverage and systematic risks in the capital market.People from all walks of life have noticed this trend and problems,but the responses are different.Regulators mainly focus on risk control;Businesses emphasize the advantages of the CIF;The academic circles show neutral attitude with both praise and criticism,but there are two obvious deficiencies:one is the lack of empirical analysis supporting,and the other is the neglect of the impact of the CIF on business risk.The author of this dissertation is in favor of DIF as a whole,but the position is similar to that of regulators,i.e.,focusing on the impact of CIF on business risks.Specifically,using the positive research method,the author will try to reveal the impacts of the CIF on the future crash of business stock price.The dissertation sets up a systematic theoretical framework,in which included are the motivation of listed companies involved with holding financial institutions,the ways to forward the CIF to the risk of future stock price crash and its general effects as a whole,and the theoretical analysis and empirical test are conducted.Through the empirical tests,the general conclusions of the dissertation can be summarized as follows.The purpose of private listed companies involved with CIF is to alleviate the external financing constraints of the business.We find that the more severe the external financing constraints are,the stronger the motivation of private listed companies involved with CIF will be.The main purpose of state-owned listed companies engaged in the CIF is to ensure that they can pass the performance assessment of regulators.Specifically,the lower the revenue growth rate and the greater the fluctuation of operating performance are,the stronger the motivation for SOEs to search for the CIF will be.In terms of the impacts of CIF on the risks of future stock price crash,the risks will be increased for both private businesses and SOEs.Specifically,the CIF for private listed companies increases the risk of stock price crash in the future.Besides the risk increase as well for the SOEs,we find that the influences are stronger when 1)the pricipal-agent problem is more se rious and 2)the political promotion of senior executives of SOEs is stronger.Information asymmetry is a common factor affecting the risk of stock price crash of both private businesses and SOEs.The empirical results also show that the CIF can reduce the risk of stock price crash in the short term,but,it is a risk accumulative process in fact,and in the long run,it will increase the risk of future stock price crash after all.There are three ways for the CIF to affect the risk of future stock price crash:explicit leverage,implicit leverage,and collusion with the institutions,all of which are confirmed by the tests of empirical results.All the three ways play an important role for private companies,but only one for the SOEs,i.e.,collusion with the institutions.The empirical results show that more credit and equity mortgage can be obtained by the private listed companies through the explicit and implicit leverage,and the increased risk of the stock price crash is also confirmed for all sample companies through institutional collusion These three tests are also a robustness test for the theoretical framework and overall conclusion of this dissertation,therefore it is put after chapter 4 and chapter 5.The theoretical significance of the conclusions in the dissertation is threefold.Firstly,it adds a new research perspective and content into the CIF field,and enriches its theoretical connotation.Secondly,on the basis of the risks from the CIF,the mechanism and active ways of the risks are further clarified and verified,enriching the research in the field of stock price crash.Thirdly,the CIF affects the independence of institutional investors,making them difficult to play the expected role in corporate governance.The policy implications in the practice are,to put it briefly,"blocking" and"preventing"."blocking" refers to the middle-process regulations to control the risks arising from the CIF,that is,blocking or reducing the negative effects of the three ways to increase the risks of stock price crash.The main bodies of government departments to play such a role are China securities regulatory commission(CSRC)and China banking regulatory commission(CBRC)."Preventing" is a pre-regulation means of the CIF to change the motivations of industrial businesses to take part in the CIF.Private businesses should enjoy the national treatment without discrimination so as to alleviate their external financing constraints;The performance appraisal of senior executives of SOEs should be based on quality and quantity,absolute and relative terms,long-term and short-term,equal remuneration principle,inter-period incentive and assessment,etc.In addition,in order to prevent the relevant financial risks to the CIF,it is necessary to enhance the adaptability of businesses to the CIF,perfect the comprehensive understanding of the CIF,and improve the corporate governance.When all the motivations for CIF breeding the adverse selection are reversed,a normal CIF will come,its various advantages will be highlighted,and the macroeconomic policy objectives can be achieved for deleveraging,decreasing the systematic risks and stabilizing the national economy.