Herd Behavior And Systematic Risk Contagion

At present,China's economy is facing the double pressures of internal structural imbalance of supply and demand and increasing uncertainty of external environment.Under the new normal of economy,the government adopts macro counter cyclical policies in combination with supply side structural reform and other measures to ensure the continuous promotion of "structural adjustment","economic stability" and "security strategy".However,there is a time lag between policy transmission and the release of reform dividend.The complex conditions for the transformation of new and old kinetic energy and the inertia pressure of insufficient demand make the "flood" increase the vulnerability of the entire economic system if it is not carefully guided.At the same time,China's multi-level capital market has gradually formed,and various types of capital market entities are diverse,the scale is expanding and they are complex related to each other,which improves the possibility of systemic risk.It is necessary for China to build a modern economic system and achieve high-quality development to guard against and resolve the major risks that may arise in the economic field and firmly hold the bottom line that systematic risks will not occur.However,the prevention of systematic risk should not only focus on its surface,but also be traced back to the source.It is found that the great destructive power of systematic risk is due to the nature of risk contagion,that is,when the fundamentals are originally healthy,exogenous shocks lead to the company's business crisis and the spread of internal contagion,which leads to the systematic risk expansion of the company itself and even the whole economic system,bringing disaster to the whole capital market(FSB/IMF/BIS,2009;IOSCO,2011)?The nature of risk contagion "joint" and "amplification" is reflected in that:the risks generated at the macro level have no direct impact on some enterprises,but they are indirectly affected by the transmission mechanism of economic variables through complex intermediary role;the risks from the micro level,due to a large number of aggregation,are accompanied by the risk amplification of risk important enterprises or financial institutions Function,formed the systematic risk that can have an impact on the whole society and macro-economy.Therefore,it is the key to prevent and resolve the systematic risk to trace the factors that affect the systematic risk and find out the corresponding risk transmission path and mechanism,which is also a sensitive issue that affects the nerve of regulators,various institutions and enterprises.According to the behavioral finance theory,herd behavior in capital market presents significant "systematic" and "infectious",which makes it have a natural relationship with systematic risk infection.Since the end of 2005,the state has implemented the strategy of"unconventional development of institutional investors".The leapfrog development of institutional investors has led to the rapid expansion of the securities analyst industry.As two important forces in the capital market,the rapid growth of the scale of securities analysts and institutional investors further aggravates the systematic and infectious herd behavior of securities analysts and institutional investors in China's capital market.The existing literature has done a lot of research on the relationship between herd behavior and various risks,but it is lack of in-depth discussion from the perspective of the combination of systematic risk and risk transmission.In view of the above situation,this paper uses the asset pricing model based on the dynamic mixed ? measure to describe the risk contagion(i.e.the systematic risk contagion)in the systematic risk,and respectively studies the herd behavior of securities analysts and institutional investors and the impact of their superimposed herd on the systematic risk contagion,and carries out effective risk prevention and control by examining their corresponding transmission channels and mechanism of action Early warning.The main conclusions of this paper are as follows.First,herd behavior of securities analysts significantly increases the systematic risk contagion of enterprises.(1)the higher the social attention,the weaker the relationship between herd behavior and systematic risk infection.This further shows that the media,through information dissemination and information manufacturing,can form a kind of supervisory deterrent to the securities analysts,and then can play a role in reducing the forecast optimism and forecast bias of the securities analysts.At the same time,it also shows that the social attention to listed companies can enhance the quality of rating reports of securities analysts,and then enhance the information symmetry between the internal and external markets of listed companies,so as to reduce the systematic risk contagion of individual stocks.From this point of view,it is an important way to reduce the systematic risk contagion of enterprises to strengthen media supervision and enhance the social attention of individual stocks.(2)for companies with Internet rumors,the more positive relationship between herd behavior of securities analysts and systematic risk contagion of enterprises is.This result further shows that Internet rumors play an important role in the pricing of capital market.Zhao Jingmei et al.(2010)found that although Internet rumors are clarified,it is still difficult to reply to the stock price.This is the opposite of the symmetrical information flow in the effective capital market theory,which should also have a symmetrical impact on the stock price.The results of this paper are also a strong proof of the above conclusions.This further shows that as a kind of"untrue" news,the role of Internet rumors in the information transmission of the capital market is difficult to "reverse".The more popular Internet rumors are,the less transparent the information in the capital market is,and the more difficult it is for the real information hidden under Internet rumors to be recognized by the market,which further aggravates the systematic risk contagion borne by enterprises.(3)the content of tangible information has no significant effect on the positive relationship between herding behavior of securities analysts and systematic risk contagion undertaken by enterprises,while the higher the content of intangible information is,the stronger the positive relationship between herding behavior of securities analysts and systematic risk contagion undertaken by enterprises is.This shows that "tangible information" related to fundamentals has no substantive impact on the relationship between herd behavior and systematic risk contagion of securities analysts,which is consistent with the information found by Cai Qingfeng and Yang Kan(2013)that securities analysts do not pay attention to the basic business philosophy,strategy,financial situation,market share,talent composition,etc.At the same time,this result also shows that the information excluding the fundamentals of the company has a significant positive impact on the relationship between the herd behavior of securities analysts and the systematic risk contagion borne by enterprises,which is a powerful illustration of the tendency of securities analysts to hype the subject matter and "catch the wind and shadow".Secondly,herd behavior of institutional investors significantly increases the systematic risk contagion of enterprises.(1)the higher the transparency of information,the weaker the positive relationship between herding behavior and systematic risk contagion.The transparency of information mentioned here focuses on the transparency of accounting information,and the transparency of company accounting information is closely related to potential investors.According to the definition of accounting information transparency of Basel Association in 1998,it can be seen that high transparency of accounting information provides investors with a perspective to see"essence" through "phenomenon",while institutional investors as capital market Information transparency should be an important content of its attention.The results of empirical analysis show that information transparency greatly reduces the degree of institutional investors' herd behavior and aggravates the systematic risk contagion of enterprises,which indicates that improving the transparency of enterprise accounting information reduces the information risk and improves the information efficiency in the capital market,and then causes a "rational regression" effect on the behavior of institutional investors,and greatly reduces the herd behavior of institutional investors The behavior aggravates the effect of systematic risk contagion.(2)the higher the quality of internal control is,the weaker the positive relationship between herding behavior and systematic risk transmission.High quality internal control not only represents the high risk control ability of enterprises,but also reflects the high governance level of listed companies.Since it was introduced into the enterprise,internal control has played a powerful role in improving the operating efficiency of the enterprise,preventing internal corruption of the enterprise and ensuring the information quality of the enterprise.However,in the aspect of risk prevention and control,internal control of the enterprise not only has the effect of preventing and controlling the "one domain" of the enterprise,but also has the effect of preventing and controlling the "overall" risk of the capital market.The research finds that(Zhang Xiangli and Chi Guohua,2018)The higher the quality of internal control,the weaker the degree of herd behavior faced by institutional investors,it can be seen that the role of internal control is beyond the expectations of regulators.The results show that the higher the quality of internal control is,the more herd behavior of institutional investors will aggravate the systematic risk contagion of individual stocks.It can be seen that internal control can reduce the systematic risk contagion of enterprises by improving the information asymmetry between the internal and external of enterprises,dredge the information channels in the systematic risk contagion of institutional investors and listed companies,and then reduce the systematic risk contagion of enterprises The role of "generalist" in risk prevention.(3)the higher the audit quality is,the weaker the positive relationship between herd behavior and systematic risk contagion.Since the separation of the two rights,the information asymmetry between shareholders and management has become a classic problem in academic research.Around how to alleviate the information asymmetry,the theoretical and practical circles have launched many discussions and practices.The introduction of external supervision is considered as an effective way to alleviate the problem.As an independent third-party supervision,external audit plays an important role in ensuring the quality of accounting information and alleviating the asymmetry of external information.Previous studies have shown that(Wang Shuai Wen,2018)the improvement of the audit quality of certified public accountants can effectively slow down the degree of herd behavior of individual stocks facing institutional investors,so high-quality audit should have a key impact on the relationship between herd behavior and systematic risk transmission undertaken by enterprises.The following results show that the higher the audit quality is,the weaker the relationship between the herd behavior of institutional investors and the systematic risk undertaken by the enterprise is.This shows that the external audit,which represents the external supervision,has the function of clearing the information channels in the systematic risk contagion of institutional investors and listed companies by improving the asymmetry of the internal and external information of the enterprise,thus reducing the systematic risk contagion undertaken by the enterprise This is similar to the role of internal audit in corporate governance.It shows that internal control and external audit not only have complementary effect in corporate governance,but also have governance"spillover" effect in capital market risk prevention and control.(4)For the companies with the tendency of information disclosure manipulation,the more positive relationship between herd behavior and systematic risk contagion is.The information asymmetry caused by the separation of the two powers also gives rise to an important problemmanagement supervision.As the "helmsman" of listed companies,once the power of the executives is not necessarily restricted,the "rational person" attribute will urge the executives to make all kinds of behaviors of seeking private interests.The disclosure manipulation of information is the "disaster area" for the executives to seek private interests.The research finds that the executives will For the purpose of "hollowing out"the company's resources,political promotion and other purposes,there are behaviors such as hiding bad news,releasing good news in advance or delaying the normal disclosure time of information.The following results show that,compared with the companies without the manipulation tendency of senior management information disclosure,the companies with the manipulation tendency of senior management information disclosure have a stronger positive relationship between herd behavior and systematic risk contagion undertaken by enterprises.It shows that the manipulation tendency of senior executives'information disclosure leads to the aggregation or centralized release of too centralized good and fast news,which "destroys" the information transmission channels of enterprises,and further intensifies the promotion consequences of institutional investors' Herding Behavior on the systematic risks borne by enterprises.Thirdly,herd behavior of securities analysts aggravates the relationship between herd behavior of institutional investors and systematic risk contagion of enterprises.(1)the network position relationship based on independent directors intensifies the positive relationship between the superimposed herd and the systematic risk contagion of individual shares.This further shows that the network formed by the connection of independent directors among A-share listed companies in China has begun to take shape and plays a huge role in the information transmission of the capital market,which is also the embodiment of the network externality,that is,the effect of each node in series in the network location is far greater than the simple linear addition,the herd of securities analysts and institutional investors It will bring disaster to the whole capital market that an enterprise node in the link network infects other enterprises through the link lines in the network and further forms a systematic infection.It can be seen that there are two Spillovers of "good" and "bad" in network externalities.When herd behavior intensifies the relationship of systematic risk contagion undertaken by enterprises in the capital market,it plays a negative external role.Therefore,the network relationship formed based on the connection of independent directors is only a tool,and the real avoidance should start from the source of risk-superimposed herd.(2)the network relationship based on the alumni circle intensifies the relationship between the superimposed herd and the systematic risk contagion of individual stocks.Similarly,the social capital based on the alumni relationship can also be put back in the network position,while what we call"good" social relationship is not a good result when it is linked with the risk of capital market,that is,the alumni relationship network intensifies the positive relationship between the superimposed sheep and the systematic risk contagion of individual shares.This study not only enriches the literature of herding behavior and systemic risk infection,but also provides a new direction for the follow-up research of herding behavior and systemic risk.On the one hand,through the attempt of secondary stratification of market risk ? and the construction of macro and micro indicators of systemic risk contagion,we try to trace the systemic risk of the enterprises behind the stock as a whole.On the other hand,this paper constructs the research framework of herding behavior and systemic risk contagion from the perspective of herding behavior of securities analysts,herding behavior of institutional investors and their superimposed herding,and explores the relationship and mechanism between herding behavior and systemic risk contagion from the above three perspectives,which is a breakthrough to the existing research content.In addition,the study of this paper also provides suggestions and reference for the risk prevention and control of various types of capital market subjects.From the perspective of risk contagion,this paper traces back to the source of systemic risk,which indicates that the prevention of systemic risk should grasp the key of risk contagion.From this perspective,it puts forward specific suggestions from the perspective of establishing and improving the supervision system of securities market,constructing the macro and micro Prudential Management framework and market individual behavior norms.