| Since the China Securities Regulatory Commission(CSRC)explicitly proposed the idea of cultivating and developing institutional investors in a remarkable and innovative way as a significant policy means to promote the development of China’s securities market in 2000,the fund industry,as a significant subset of institutional investors,has undergone great development in the past 20 years.By the end of 2021,China’s hedge fund industry is worth more than 6 trillion RMB,and the scale of similar mutual funds is around 8 trillion RMB;In terms of asset management scope and average daily trading volume,China’s hedge funds are competitive with mutual funds in the equities capital market and have emerged as a key source of outside institutional investors for Chinese listed firms.Hedge funds and mutual funds differ significantly from one another in terms of management style,incentive structure,regulatory limitations,and a variety of other factors(Ackermann et al.,1999;Stulz,2007;Agarwal et al.,2011;Chen et al.,2014;Zhao et al.,2018;Li et al.,2021).Scholars domestically and internationally have conducted study on the distinctions between hedge funds and mutual funds from the perspectives of fund performance,risk management,and economic effects on the capital market.Therefore,this article investigates hedge funds as a separate institutional investor in accordance with research practices in the literature both domestically and internationally and promote the research paradigm from the individual characteristics to the network structure.With the development of social network theory and the renewal of research paradigm,the existing literature has evolved over time from focusing on the existence of individual relationships and defining social relationship link as a dummy variable into the model(Hong et al.,2005;Cohen et al.,2008;Ozsoylev et al.,2014)to the discussion with the characteristics of the entire network structure as the study core(Shen et al.,2015;Gerritzen et al.,2016;Foroughi,2017).In the extant literature,there are three different definitions of institutional investor networks that are based on social characteristics,professional relationships,and investment objectives(Liu et al.,2016).The impact of institutional investors’ networks on stock pricing efficiency has been examined in both domestic and international literature,although the results are not all in agreement.Hedge funds typically use absolute income for performance incentives,which is unrestricted in position scale and trading mode and can play the role of “market stabilizer”(Li et al.,2021),in contrast to mutual funds with relative income incentive mechanisms and fierce competition among peers.However,there is little research on its network effect.Based on the competitor communication model proposed by Stein(2008)and the fund manager communication model proposed by Crawford et al.(2017),and after reviewing the classic literatures and the specific institutional background of hedge funds in China,the information network of hedge funds is constructed by common holding of listed firms.Combined with the exogenous events of the change of regulatory policies in the hedge fund industry in 2016,this paper investigates the impact of the hedge fund network density on the stock price information of listed firms.This paper mainly includes nine chapters.The first chapter introduces the research background,research ideas,research methodologies,concept definition,research framework.The second chapter discusses each of the four sections of the classic literature on the subject,which are: hedge fund behavior and its economic consequences;institutional investor network and its economic consequences;the influencing factors and economic effects of stock price information;hedge fund networks and information environment of listed firms.The third chapter discusses the industry development process,regulatory evolution,potential effects on the financial market,and potential future development of China’s hedge funds.In order to create a theoretical framework with Chinese practice,the fourth chapter conducts a theoretical analysis after reviewing the literature and studying China’s unique institutional background,it also presents research hypotheses.The fifth chapter develops a theoretically-based empirical test model and performs basic descriptive statistics on the following empirical investigation.The sixth chapter makes empirical tests based on the design of theoretical model and discusses the main result and mechanism tests.The seventh chapter discusses the empirical results of the network characters and listed firm characters’ influence.The eighth chapter reports the robustness test results,including endogeneity tests.The ninth chapter is the summary of the full text,which includes three parts: research conclusions and enlightenment,policy suggestions,research limitations and future directions.Based on theoretical and empirical analysis,the key findings of this paper are as follows:(1)Chinese hedge funds promote the diffusion of private information and reduce the governance cost of external supervision through information communication and learning effect in the network,and finally enhance the stock price information of listed firms.(2)The hedge fund network integrates information on listed firms into stock prices to a greater extent when they are the subject of short selling and securities lending,which suggests that short selling is an important channel for hedge fund network to integrate the private information into the stock prices.(3)Hedge funds reduce the governance cost of external supervision through the learning effect in the network,and the increase of network density reduces the agency cost of listed firms,and increases the quality of accounting information and accounting conservatism.Moreover,the network density of hedge funds has a positive impact on the stock price information,which is more obvious in non-SOEs and firms with lower information transparency.(4)This paper finds that the network density has a more obvious effect on the stock price information in the reliable(long-term cooperation)hedge fund network.(5)Valuable information is often confined to small groups and will not be disseminated.This paper suggests that listed firms are embedded in the network through hedge funds with high centrality,the network density has a positive impact on the stock price information.(6)After the implementation of the regulatory policy of strengthening the information disclosure responsibility of hedge fund companies and increasing the penalties for false and illegal information disclosure,the trust degree in the hedge fund network increases,and the positive impact of network density on the stock price information enhanced.(7)This paper manually collects the data of hedge fund companies that have been subject to administrative punishment for unqualified information disclosure or false information disclosure every year after 2016,and finds that in the hedge fund network with higher information disclosure quality,the network density has a stronger effect on improving the stock price information of listed firms.(8)The increase of network density increases the annualized return,excess return,and Sharpe ratio of hedge funds,and reduces the risk ratio of fund performance.The theoretical contributions of this paper are as follows:Firstly,this paper enriches the related research on the impact of institutional investor network heterogeneity on the stock price information,and provides empirical evidence of the hedge fund network impact on the stock price information.Secondly,this paper enriches the related literature on global hedge fund network behavior and economic consequences,and provides empirical evidence from China.Thirdly,this paper enriches the related research on the governance effect of hedge fund network,and examines the influence of hedge fund network density on the stock price information from the perspective of governance,which provides new empirical evidence for the governance effect of network.The practical contributions of this paper are as follows:Firstly,the conclusions of this paper are helpful to understand the impact of China’s hedge fund network on the information environment of listed firms,and provide theoretical and empirical basis for financial regulators to formulate policies to optimize the efficiency of resource allocation.Secondly,the conclusion of this study is helpful to understand the differentiated economic consequences of institutional investor heterogeneity,and provide theoretical basis and empirical evidence for regulators to implement refined regulatory policies.Thirdly,this study is helpful to understand the impact of hedge fund network on corporate governance,especially on the quality of accounting and financial information,and provide theoretical basis and empirical evidence for regulators to formulate relevant policies.Finally,the research conclusion of this paper will help to understand the impact of China’s hedge fund industry on the capital market,and provide forward-looking opinions for promoting the development of China’s hedge fund industry,guiding the design of FOF products,and formulating regulatory policies for hedge funds. |
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