Institutional Investor,Network Embeddedness And Stock Price Crash Risk

The crash of stock price,also known as the collapse of stock price,is an important issue affecting the stock return and the stability of the current financial market.In recent years,stock price crashes occur frequently in Chinese capital market.It will not only shake investors’ confidence,but also have certain "infectivity" that will disrupt the entire stock market.What are the influencing factors that caused the stock price crash?How to prevent and defuse the risk of stock price collapse?Are the increasing institutional investors "accelerators" to help the stock price up and down,or"stabilizers" to smooth out fluctuations?Are the increasing institutional investors"shadow dancers" who seek opportunities for change,or "gatekeepers" who are dedicated to their duties?At present,the relevant research on stock price crash risk is mostly based on the"reduction" perspective of reductionism,which treats market participants including institutional investors and company managers as isolated individuals,and studies individual characteristics,behavior patterns and the environment on stock price crash risk.This research paradigm cannot restore the "social embeddedness" of individual economic activities in the real world.It is urgent to introduce the "interactive"perspective of social network to bridge the gap between the macro environment and micro individuals.This article takes this phenomenon as an entry point,focuses on the core issue of"institutional investors and listed companies’ social networks and the impact of network embedded characteristics on the stock price crash risk ",integrates social capital theory,social mosaic theory,weak ties theory and structural hole theory,uses social network analysis,descriptive statistical analysis and large-sample statistical testing methods to systematically study the structural characteristics of institutional networks and corporate networks and the influence mechanism of network embedded characteristics on the stock price crash risk,with a view to promoting social network application in the field of corporate finance and to provide enlightenment for preventing and resolving the stock price crash risk.Four sub-studies are designed around the core issues.The research process and conclusions are as follows:In the first sub-study "Characteristics and Evolution of Institutional Network and Corporate Network:Concentration’ or ’Polarization’?",based on the fund’s annual shareholding data from 2007 to 2018,this paper constructs institutional joint shareholding networks and company chain shareholder networks and analyzes the structure features and evolution trends of the institutional network and the company network.The results show that in Chinese capital market,the institutional network structure presents a "concentrated" unipolar morphological characteristic,while the corporate network structure presents a "polarized" multi-polar morphological characteristic.In the second sub-study "Corporate Network Position and Stock Price Crash Risk:’Realth’or ’Reputation’?",based on Chinese A-share non-financial listing companies from 2010 to 2018,this paper explores the influence and mechanism of the company network position on the stock price crash risk.The empirical evidences show that the company’s network position has a "wealth effect",which means that the company’s network position advantage stimulates the managers’ profit motives and induces them to hide negative information,thereby increasing the risk of stock prices plummeting.Further research evidences show that the company’s network position affects the risk of stock prices plummeting through both the "information effect" and the"control effect",while the "information channel","accounting channel" and"investment channel" are the paths.The above research results show that in Chinese capital market,managers of companies that occupy a higher position in the network will pursue profit-driven "wealth" rather than value-driven "reputation."In the third sub-study "Institutional Network Position and Stock Price Crash Risk:’Collusion’ or’Governance’?",based on Chinese A-share non-financial listing companies from 2010 to 2018,this paper explores the effect and mechanism of the impact of institutional network position on the stock price crash risk.The empirical evidences show that the central position of the institutional network has a "collusion effect",while the intermediary position of the institutional network has a "governance effect".It means that institutional investors occupying the central position of the network will collude with the structurally equivalent manager to cover up negative information because of the structural restrictions and upward obstacles.Meanwhile,the institutions occupying the intermediary position of the institutional network will excavate the heterogeneous information resources in the network to reduce the stock price crash risk because ofstructural opportunities and upward mobility.Further research evidences show that "information channels" and "transaction channels" are the paths through which the collusion effect of the central position plays a role,and the"information channels","accounting channels","investment channels" and "resource channels" are the paths through which the governance effect of the intermediary position plays a role.The above research results show that in Chinese capital market,institutional investors occupying the central position of the network will choose to"collude" with managers,and institutional investors occupying the intermediary position of network will choose to "govern".In the fourth sub-study "Institutional Geographic Proximity and Stock Price Crash Risk:’Monitoring’ or ’Transaction’?",based on Chinese A-share non-financial listing companies from 2010 to 2018,this paper manually collects the geographic distance data between institutional investors and listed companies,constructs an institutional geographic proximity index and explores the effect and mechanism of institutional geographic proximity on the stock price crash risk.The empirical evidences show that institutional geographic proximity has a "supervisory effect",which means that geographic proximity will reduce the supervision cost of institutional investors as a whole,prompt institutions to implement active supervision,inhibit management’s ability and motivation to hide bad news,and s reduce the stock price crash risk.Further research evidences show the geographical proximity of institutions mainly affects the stock price crash risk through the "control effect".The above research results show that in Chinese capital market,geographically close institutional investors will implement active "minitoring" in the long term rather than passively short-sighted"transaction".The main innovations of this paper are as follows:Firstly,the relationship between the "social embeddedness" of individual economic activities and the stock price crash risk has been explored from the "interactive" perspective of social network,which makes up the defect of insufficient interpretation from the "reduction" perspective of existing research.Secondly,based on the "dual space" and "three-dimensional network"characteristics of the embedded position of the institution and the company,the heterogeneity of network embedded characteristics has been systematically identified.Thirdly,a company chain shareholder network and a joint shareholding network of institutions based on investment relations has been constructed at one time using the dual-mode network construction method and the single-mode hierarchical conversion method.Fourthly,based on the social network theory,a systematic theoretical framework of "structure(relationship)-opportunity-action" has been exploratory proposed,laying the foundation for the depth and expansion of follow-up research.