Will Stock Price Crash Risk Intensify In The Margin Trading System?

In March 2010,the margin financing and securities lending system is officially launched in domestic A-share market,it proclaims that China's securities market officially enters the bilateral trading mode,aims to improve the efficiency of stock pricing and stabilizes the operation of the market.Despite this,the margin transaction itself features a gamble for big from small,support for rise and restraint for fall,which may incur the increase of market speculation sentiment,ineffectiveness of stock pricing and disturbance in market order.In the actual operation process,Anomalies that 16 times limit-down of thousands stocks occurred in the two months of the 2015 stock market crash.So whether the financing and securities lending system can achieve the original intention of the market to stabilize the stock price fluctuations caused a heated discussion.Due to the relatively late start of China's margin financing and securities lending business,the relevant research literature is relatively small in that domestic margin business started late,and scholars have disagreement regarding the links between margin trading and stock price collapse risk.In order to clarify whether there occurs difference of the company's stock price collapse risk before and after the permission of the margin trading,and whether the impacts of financing transactions and securities trading on the stock price collapse risk are symmetrical.This paper based on the above problems systematically sorts out the literature related to margin research and stock price crash research,and summarizes the internal causes and come up with the following research hypotheses: whether there exists the distinctions in targeted companies stocks prices crash risks before and after they join into the list? Are the impacts of securities lending and margin trading on prices crash risks symmetric?In terms of empirical research,we first use the weekly yield of individual stocks to calculate two indexes of NCSKEW?DUVOL which measure the company's collapse risk.Secondly,due to the gradual promotion of the pilot financing and securities lending system and five expansions after the launch of system,this article takes this opportunity to set up natural experimental and control samples for different batches of selected companies,exploring the impact of the margin financing system on the risk of stock market crash via the double difference model.In addition,this paper takes the companies of the Shanghai and Shenzhen stock exchanges in 2009-2017 as the experimental group and the company obtained by PSMmatching as the control group for further testing to undo the disturbance of external environment and policy.The specific process is as follow,we first construct logic regress which involves the indexes of the market capitalization ratio,annual turnover rate,asset-liability ratio,listing years,small and medium-sized board or GEM.and calculate the propensity score of each observation sample,and then use the nearest neighbor matching to obtain the sample company after the PSM match for further testing.Finally,on the basis of the above,the financing and securities lending agency indicators are added to analyze the impact of financing transactions and securities lending transactions on the company's stock price collapse risk.This paper gives the following conclusions via empirical researches above.Firstly,the prices collapse risks of margin trade targeted companies before they are listed are significantly lower than those of non-targeted ones.Secondly,the prices collapse risks significantly increased after the targeted companies are listed.No matter a sample of different margin trading batches of companies,or a sample of companies after PSM matching,the result after the examination of Diffrence-In-Difference Model show that,on the one hand,variable Treat that represents whether it is targeted company is significantly negative,it reveals that the prices collapse risks of margin trade companies are lower than others.On the other hand,the Post Treat is significantly positive which reveals that the effect of securities lending and margin trading is contrary to the initial purpose of policy-maker,the policy fails to moderate the collapse risk of individual stocks but significantly exaggerate it.The impacts of margin trading and securities lending on the risk of price collapse are asymmetric.It is found in the further examination concerning the asymmetry of securities lending and margin trading impacts on individual stock collapse risk,variable Short is significantly positive in each empirical range,it demonstrates that margin trading significantly exaggerate the risk of price collapse.The financing transaction can suppress the stock price collapse slightly when the market is running smoothly.However,the financing transaction,to some extent,also raises the collapse risk of individual stocks in the extreme market of inflation and plunging.In summary,the two trading methods have asymmetry effects on the risk of stock market collapse in different market conditions.