Institutional Investors,Margin-trading And Short-selling,and Stock Price Crash Risk

After more than 20 years of rapid development,Chinese capital market has made tremendous achievements in terms of total transaction volume and stock size,but there are still problems such as low information efficiency and low resource allocation efficiency.In recent years,the problem of “suddenly escalating and plunging” in the market has been particularly acute.The market collapse caused by “plunge” has occurred from time to time.Under the guidance of the strategy of “traditionally developing institutional investors”,Chinese institutional investors have gradually exhibited a variety of features and large scales.Based on this,we study weather institutional investors will also affect the stock price crash risk? Is this impact related to the category of institutional investors? In 2010,China officially launched margin-trading and short-selling.Will it also affect the stock price crash risk? This article studies the above issues.This article selects the transaction data of Chinese A-share listed companies from 2004 to 2016 as sample,use multiple regression model and dual difference model,through descriptive statistical analysis,correlation analysis and univariate analysis to empirically analyze the relationship between institutional investors,margin-trading and short-selling and stock price crash risk.The results of the study show that:(1)The higher shareholding of institutional investors,the higher stock price crash risk in listed companies.(2)Institutional investors of different types have different impacts on stock price crash risk: stock price crash risk increases significantly with the shareholding of Fund Company,Securities Company Financial Products,Insurance Company,Social Security Fund,and Private Equity.(3)The impact of margin-trading and short-selling on the stock price crash risk differs before and after its formal implementation.Prior to the implementation,the listed companies that became the subject of margin-trading and short-selling,which the future stock price crash risk is significantly lower than the other listed companies;however,after formal implementation,the listed companies that became the subject of margin-trading and short-selling,which the future stock price crash risk is significantly higher than the other listed companies.It means that the formal implementation of margin-trading and short-selling has increased the stock price crash risk.(4)The formal implementation of margin-trading and short-selling has enabled the positive impact of institutional investors on the stock price crash risk.Based on the results,we believe that on the one hand,Chinese institutional investors have speculative and insider trading behaviors,which exacerbates information asymmetry and increases the stock price crash risk.On the other hand,there is a clear leverage effect in Chinese margin-trading and short-selling,which is the main reason for the stock price crash risk.Thus,we propose three policy recommendations: First,to improve the quality of information disclosure and reduce information asymmetry;Second,to strengthen the guidance and supervision of institutional investors,and standardize their investment behavior.Third,to improve the system of margin-trading and short-selling and the effectiveness of governance.