Network Of Shareholders And Stock Price Synchronicity

Network effect has been widely considered in asset pricing,corporate governance and risk management.The network of shareholders incorporates information about the relationship among shareholders of listed firms,and its degree of connection and structure may generate a significant impact to stock price synchronicity of individual stocks.Using quarterly data of top 10 largest shareholders of A-sha re stock market from 2003-2016,we establish a network of influential shareholders,with adjacent stocks defined as two stocks who share at least one common top 10 largest shareholder.This paper use social network analysis method to build three network topology variables to measure degree,validity and length of shareholder networks.By using panel regression,this paper firmly demonstrate the shareholder networks in A-share could significantly increase the stock price synchronicity because it acts as a tunnel effect for companies to homogenize and weaken the corporate boundaries.Specifically,the companies locating in the network center or acting as an important node to connect companies or easily to approach other companies in the network could get more similar under same common shareholders.It is more likely to reduce their firm-specific information and make stock price co-move frequently basing on the information of stock market.My research has a meaningful result for supervision department to publish good policies to improve the efficiencies of stock market on the problem that share network bring about.