The Proportion Of Shares Held By Institutional Investors And Stock Price Crash Risk

Compared with western countries,the capital market in China started relatively late,so it is easier to see a surge and slump of publicly traded A-share stock price.A slump of stock price will not only cut investors' fortune,reduce companies' value,lose investors' faith in capital market,but also reduce the efficiency of resource allocation in capital market and shake the stable of financial system in our country.China has gradually formed a diversified institutional development pattern based on securities investment funds and together with other investment funds under the policy of the CSRC to develop institutional investors recently.From 2003 to the first half of 2017,institutional investors' shareholdings increased from 12%to 17.44%.Thus it can be seen,institutional investors are becoming an important participant in capital market by promotion of market-oriented reform in China's supervision layer.So,it is my discussion in this paper if institutional investors will play an important role in corporate governance and make the stock price stable.In this paper,I study the relation between the proportion of shares held by institutional investors and the stock price crash risk using a sample of Chinese publicly traded A-share stocks during 2004-2016.By my study,I find that the shareholding of institutional investors and stock price crash risk are positively correlated when the proportion of shares is under 33.6%.After the institutional investors hold more than 33.6%shares,they will participate in corporate governance and finally lower stock price crash risk.My further study indicates that in the companies which are lack of transparency or state-owned,institutional investors will play a supervisory role with low proportion of shares.So the results show that only if we continue to strive to develop institutional investors,strengthen the company's internal control construction,optimize the ownership structure of the company,deepen the reform of state-owned enterprises,will it reduce crash risk of stock price and promote the healthy development of capital market.