Accounting Conservatism, The Proportion Of Institutional Investors Holding And Stock Price Crash Risk

Since the last century, the stock market turbulence and the stock price volatility interfere the operation of capital market and affect the efficiency of the financial system for the configuration of the capital market, particularly the collapse of the share price risk caused by "the crash". Thus regulators, investors and academics began to focus on stock price crash risk, which has become a hot research issue of Finance. Information is the core foundation of current research on stock price crash risk, due to the stock price collapse caused by the centralized releases of bad news. But few studies study the causes of the stock price crash risk based on accounting conservatism, particularly those studies on Chinese stock market. In the last 30 years, institutional investor has become one of the most important roles of the world capital market. But there has not been a unified conclusion on academia about the role of institutional investors in the capital market. So what roles the institutional investors in China actually play in the capital market is an important part of this article, which is helpful to reveal the mechanism that accounting conservatism influences the stock price crash risk. Therefore, the article will study the share price risk as the core, combine the risk with the actual quality of accounting information of listed companies, focus on interpretation of the mechanism that accounting conservatism influences the stock price crash risk and also study the shareholding ratio of institutional investors.This article will also study how the proportion of institutional investors holding influence the relationship. By studying these problems, this article has certain practical and theoretical significance to reduce financial risks in China’s capital market, stabilize the stock market and protect the interests of investors.Based on theory of financial behavior, asymmetric information and principal agency, the article takes the way of normative and empirical research. By selecting the relevant data of 2008-2014 A-share listed companies, the article mainly studies the relation between accounting conservatism the stock price crash risk. It also studies how the proportion of institutional investors holding effects the relationship between accounting conservatism and risk of stock collapse, the final conclusion is:(1) as the basic principles of accounting recognition and measurement, accounting conservatism makes financial statements more sensitive and timely to reflect bad news than to reflect good news, and reduces the accounting information manipulation caused by management. In this way, the accumulation of bad news and the stock price crash risk can be reduced.(2) Institutional investors in the capital markets play increasingly important roles. When the proportion of institutional investors holding is higher, the institutional investors participate actively in the corporate governance and the stock price can reflect more information. Moreover, the impact of accounting conservation on the stock price crash risk will be strengthened. In a word, the higher the shareholding ratio of institutional investors is, the stronger the negative relationship between the accounting conservatism and stock price crash risk is.The whole article is divided into five parts:The first part is the introduction, the background, purpose and meaning, as well as research ideas and innovations.The second part is the literature review and theoretical foundation. First, the author summarizes the idea of the research results based on the line of thinking——"stock price crash risk- accounting conservatism- institutional investors". Then, the author defines the explanatory variables and the dependent variable conceptualise and introduce the theoretical foundation that the literature review has mentioned.The third part is the empirical research part. This part is to provide the basis foregoing literature review and theoretical overview of the research hypotheses, and select the relevant data of 2008-2014 A-share listed companies. The author uses NCSKEW and DUVOL to measure the stock price crash risk, use the the improved C-score model based on Basu model to measure accounting conservatism and use the multiple linear regression to design model.The fourth part is empirical analysis part. This part is mainly to do the descriptive analysis, correlation analysis and regression analysis of the results of data processing and to do the empirical test of the proposed hypothesis. The fifth part is the conclusion, policy recommendations, shortcomings of this study.