Institutional Investors And Crash Risk

Due to the frequent inflation and slump in domestic stock market in recent years,Crash Risk has gradually become an important issue in academic research.Meanwhile,whether Institutional Investors can play the role of external regulators as expected in corporate governance gains much attention.The relationship between the two is worthy of further study.Based on this background,this paper studies the relationship between Institutional Investor Stability and Crash Risk.By reviewing the previous research results,combing the causes of crash risk and the "Shareholder Activism" theory,this paper then puts forward the theoretical hypothesis that institutional investors can actively participate in corporate governance and reduce crash risk.We use the data of China A-share listed companies over the period of 2008-2016 to construct crash risk indexes and institutional investor stability indexes.The paper finds:(1)Institutional investor stability is negatively correlated with crash risk;(2)One of the mediators of the above relationship is Earning Management,confirming the "Shareholder Activism" theory;(3)Whether the company is a stateowned business or not will have an impact on the above relationship;(4)Our findings are shown to be robust to alternative empirical specifications,estimation methods and endogeneity concerns.This paper provides an important perspective of crash risk : Institutional investor stability,and also offers empirical evidence for the "Shareholder Activism" theory.The conclusion may provide a reference for policy makers in formulating relerant policies,and can be evidence for investment decisions.