Accounting Conservatism,Institutional Investors Group Heterogeneity And Risk Of Stock Price Crash

Significant capital market turbulence can undermine the orderly functioning of economic markets.China’s A-share market is still in its infancy,and the existence of information asymmetry allows corporate management to conceal negative information for long periods of time,leading to undesirable information hoarding,which in turn can cause dramatic share price fluctuations and even crashes.Practice has shown that share price crashes are closely related to inappropriate disclosure and use of information.From the information supply side,companies requiring more robust accounting information can make management behavior more conscious and long-term,thereby reducing the risk of a share price crash.From the information demand side,institutional investors,as large information users,may prefer to choose companies with more robust accounting information disclosure for long-term benefits and actively play their own regulatory role,thus reducing the risk of share price collapse of their holdings.The risk of share price collapse is further exacerbated by the fact that institutional investors are heavily syndicated in order to enhance their profitability.Therefore,it is of theoretical and practical significance to incorporate the heterogeneity of institutional investor groups into the framework of corporate accounting soundness and share price crashes,and to study the relationship between the three.Based on information asymmetry theory,behavioral finance theory and principal-agent theory,this paper constructs a multi-dimensional linear regression model to conduct the study with A-share listed companies in China from 2010 to 2020.The relationship between accounting robustness in financial reporting and the risk of share price collapse is first examined at the firm level.It was found that the more conservative a company’s accounting policies are,the lower the probability of its unique negative information being hidden and hoarded,and the lower the likelihood of future share price collapse.Secondly,the Louvain algorithm was used to approximate the group of institutional investors,and group heterogeneity was measured in terms of both group shareholding and group stability to test its impact on share price crashes.The findings show that institutional investor group shareholding and group stability are significantly and positively related to a firm’s risk of future share price collapse;and both negatively moderate the role of accounting robustness in managing share price collapse risk.It is further found that accounting robustness has a more pronounced effect on the governance of share price collapse risk in state-owned enterprises,which is limited in firms with high agency costs,but the positive effect of institutional investor group heterogeneity is enhanced.Finally,based on the above findings,this paper puts forward the following policy recommendations from the regulatory side and the enterprise side respectively:improve the construction of the accounting information disclosure system;regulate the behavior of institutional investors to reduce the permanence and fixity of their group behavior;and improve the internal governance mechanism to enhance the overall corporate governance level.The innovations and contributions of this paper are as follows:Firstly,innovation in research perspective:focusing on the interaction within institutional investor groups,the study of the impact of their heterogeneity on listed companies complements the research in related fields.The second is the innovation of research methodology:the Louvain algorithm is used to extract institutional investor groups,further calculate institutional investor group shareholdings and group stability,and study its interaction with accounting robustness.