Research On The Relationship Between Stock Liquidity And Stock Price Crash Risk

The stock market can quickly raise large amounts of funds for corporations and promote the transformation of corporations into modern corporation systems.It also allows society to make maximum use of decentralized funds.Diversification of investment by investors also diversifies investment risks,which is beneficial to the preservation and appreciation of personal wealth.The stock market is crucial to the development of the Chinese economy.However,based on our national conditions,China's stock market is very fragile.Once a crash occurs,it will easily cause market panic and affect the steady development of Chinese economy.This paper studies the influence of stock liquidity on the stock price crash.After reviewing the literature of the causes and influencing factors of the crash risk,the theory of stock liquidity and the argument for the positive and negative correlation effects of liquidity on the crash risk,this paper studies the influence of stock liquidity on stock price crash and further examines the nature of the property rights,the proportion of the corporation's major shareholders and the proportion of institutional shareholdings effect on the relationship between the two by taking the liquidity of the Shanghai and Shenzhen A-share market as an example.Several relevant variables are elected and different regression models are established.One model examines the relationship between liquidity and crash risk and checks whether there are differences relationship between them in different nature of property rights.The other two models respectively examine the interaction effect of proportion of major shareholders and institutional investors on the relationship between liquidity and crash risk.Then this paper selects relevant data of A-share listed corporations in the non-financial industry for 10 consecutive years from 2007 to 2017.Using the Hausman test,the data should adopt a fixed-effect model.The results show: The higher the liquidity of stock,the greater the possibility of a crash,and the higher the crash risk;However,because of differences in the nature of property rights,the liquidity of non-state-owned corporations has a weaker positive impact on the collapse risk than state-owned corporations;In addition,because of the difference in shareholding ratio of major shareholders,corporations with higher ratios of shares held by major shareholders will have weaker positive effects on the influence of liquidity on the crash risk;Because of difference in the proportion of institutional investors,corporations with higher institutional investor shareholdings have stronger positive c orrelations between liquidity and crash risk;Comparing with the stable institutional investors,the liquidity of stable institutional investors have stronger positive effect on the crash risk.Finally,based on the analysis of research results,this paper puts forward policy suggestions to avoid stock price crashes.