Research On The Risk Impact Of Insurance Companies’ Investment In Chinese Stock Market

Since the China Insurance Regulatory Commission’s entry thresholds for insurance companies and the relaxation of investment quotas in 2009,insurance capital has continued to be active in the stock market,especially with the frequent insurance company participation in the past few years,the insurance capital has become a market force that cannot be underestimated.However,as an important center for the allocation of modern economic resources,the capital market plays an important role.In particular,as the Chinese market is an emerging market,the problem of stock price anomalies is more obvious.The abnormal fluctuations of stock prices may cause the capital market oscillate on the surface,in fact it will lead to immaturity of the market,the speculative psychology of participating entities,and the low efficiency of information allocation.Under the game of the interests of market players at all levels,how does the insurance funds affect market value risks? Under this research background,this paper attempts to analyze the spillover effects of insurance company participation and market value from the perspective of different parties.The research innovation of this paper is mainly reflected in the following aspects.First,this article extends the governance effect of insurance funds to the extreme phenomenon of stock prices in the capital market,and studies the risk of insurance company participation on crash risk,stock price synchronization,and investment-price sensitivity.Besides,it enrich the related literature on risk management effect,insurance company participation and stock price risk;Second,this paper analyzes and explories the relationship between insurance company participation and market risk from the perspective of controlling shareholder,investor behavior and company’s internal information transparency,which has enriched the research on stock market risk in the capital market.Third,this paper analyzes the relationship between insurance company participation and various stakeholders,focusing on the analysis of the impact of insurance company participation on the psychology and behavior of different stakeholders in different scenarios,and conducted in-depth analysis of mechanism and specific paths,which provided feasibility suggestions for company on strengthening internal control and stock price risk management.Specific empirical research work is as follows.Chapter 4 analyzes the characteristics of listed companies with insurance company participation firstly,and compare their holding preferences,the number and proportion of holdings,insurance capital trading strategies,and comparing insurance capital holdings with all listed companies,it finds the characteristics of insurance company shareholding;then establish a double difference model based on the sample data before and after the insurance company participation boom,and expand a quasi-natural experiment on the relationship between insurance company participation and stock price risk.Using descriptive statistics,parallel trend test,PSM test,the relationship between insurance company participation and stock price risk was discovered.The study concluded that “insurance company participation” can reduce the fluctuation range of individual stock returns.Further analysis shows that although the turnover rate is an important indicator showing the strength of stock circulation,generally speaking,listed companies with higher turnover rates,the volatility of individual stock returns was smaller,but no significant difference was found through heterogeneity analysis.Chapter 5 is the impact of insurance companies’ investment in Chinese stock market on crash risk.Firstly,this paper analyzes the equity pledge behavior from the perspective of shareholders,and analyze the relationship between the pledge behavior and crash risk.Next,discuss insurance company participation,equity pledge and crash risk in a unified situation.Thus,the intermediary effect of insurance company participation on the equity pledge behavior of shareholders and the risk of stock price crash is discovered.The results of the study are as follows:(1)The crash risk under equity pledge is low.This is mainly because the company will strengthen internal governance and earnings management in order to obtain equity pledge and high leverage qualifications.The company’s market value management and performance will increase,and increasing investor recognition will lead to a buy of a large number of stocks.At the same time,as equity pledged stocks are temporarily frozen in the market,the market’s tradable share capital will correspondingly decrease and stock price will rise;(2)Further research finds that the insurance company participation can further reduce crash risk caused by equity pledge,it is because: insurance company participation can prevent stock prices from falling through strengthening corporate governance supervision;at the same time,it can strengthen market confidence and provide capital protection when the company’s equity pledge liquidity is insufficient,once it reaches the liquidation line financial support is provinded when there is a risk of liquidation,itplays an intermediary effect,especially for private companies and a high shareholding ratio of large shareholders companies,and the effect of reducing the risk of collapse is more obvious;(3)When core variables are taken in the larger group or the smaller group,compare equity pledge group with no equity pledge group,insurance company participation can reduce the crash risk by 0.009.Compare insurance company participation group with no insurance company participation group,insurance company participation can reduce crash risk by 0.059.Compare “equity pledge and insurance company participation group” with “no equity pledge and no insurance company participation” group,the crash risk reduced by 0.837.Chapter 6 is the impact of insurance companies’ investment in Chinese stock market on stock price synchronization.Firstly,this paper analyzes the investor sentiment from market perspective,and analyze the relationship between the investor sentiment and stock price synchronization.Next,put insurance company participation,investor sentiment and stock price synchronization in a specific situation,then discuss and find out the mediating impact of insurance company participation,investor sentiment and stock price synchronization.The results show that:(1)The investor sentiment of stock forum will increase stock price synchronization in the short term,and they have a positive relationship;(2)Insurance company participation reduces the impact of investor sentiment on the synchronization of stock prices effectively,it plays a certain intermediary effect,and the higher the proportion of insurance company participation,the more obvious the effect,because it will play a positive role in the capital market through corporate governance after insurance company participates in the shares,which will help stabilize investor sentiment under the information effect of the online forum,the herd effect and the same rise and fall effect reduced,this effect is more obvious in the sample of state-owned enterprises;(3)When core variables are taken in larger groups or in a smaller groups.Compare high investor sentiment group with low investor sentiment group,insurance company participation can reduce stock price synchronization by 0.139,compare insurance company participation group with no insurance company participation group,stock price synchronization reduced by 0.212.Compare “high investor sentiment and insurance company participation” group with “low investor sentiment and no insurance company participation” group,the stock price synchronization reduced by 4.031.Chapter 7 is the impact of insurance companies’ investment in Chinese stock market on investment-price sensitivity.First,it analyzes the information transparency from the perspective of company,and test the relationship between it and investment-price sensitivity.Next,put insurance company participation,information transparency,and investment-price sensitivity in a unified situation,it discovers the mediating effect of insurance company participation and company’s accounting information behavior on the investment-price sensitivity in its actual economic decision-making.It finds that:(1)The higher the transparency of information,the more obvious the feedback effect on the company’s investment-price sensitivity;(2)After insurance company participation,it plays a certain intermediary effect through strengthening the external supervision,which will make information transparency more sensitive to investmentprice sensitivity,and the higher the proportion of insurance capital holdings,the more obvious the effect.This effect is more obvious in the group with a high degree of separation of the two powers and a high leverage ratio;(3)When core variables are all taken in larger groups or smaller groups,compare high information transparency group with low information transparency group,investment-price sensitivity increased by 0.024.Compare insurance company participation group with no insurance company participation group,investment-price sensitivity increased by 0.007.Compare “high information transparency and insurance company participation” group with “low information transparency and no insurance company participation” group,investmentprice sensitivity increased by 0.47.In short,the results of empirical studies have verified that insurance company participation has a reducing effect on the overall risk in the market,and risk reducing effect at different levels of the market can be achieved through psychological and behavioral impact on different parties(controlling shareholders,investors,and internal information of the company).Finally,the research conclusions and future prospects.First of all,this paper summarize the basic research results of the full text,and then propose systematic policy recommendations based on specific empirical research results.Insurance companies should raise the risk awareness especially in the issue of equity investment,and they must dig deep into the potential market valuel of listed companies,so as to form a correct judgment,then fully consider the liquidity and security of funds in order tostrengthen the company’s asset and liability management,and improve the company’s capital allocation structure;Listed companies must effectively limit the intervention of insurance companies,improve identification ability,and strive to introduce high-quality insurance companies to the market,improve company’s internal governance structure effectively and improve company’s operating performance;The country must formulate appropriate laws and regulations to regulate the behavior of insurance companies,and guide and supervise them healthily,so as to give full play to the role of the market in the allocation of resources;In terms of shareholders,they should strengthen the supervision of company’s controlling shareholders in order to prevent their opportunistic speculation;In terms of investors,we must strengthen their education,and the country must update market information reorganization and establish the correct investment sentiment orientation;China,as an emerging capital market,must strengthen information supervision of listed companies and cultivate outstanding analyst teams to improve information content.In short,insurance companies are important market forces in the capital market,the country and various levels of society should provide development support and guide them give full play of insurance capital in the capital market.