The Impact Of Institutional Investor Distraction On The Stock Price Crash Risk

Since the establishment of Shanghai and Shenzhen Stock Exchanges in 1990,after more than 30 years of reform and development,China’s capital market has achieved historic breakthrough and leapfrog development from scratch and from small to large.From a single main board trading market,China’s capital market has gradually formed a new pattern of multi-level expansion,dislocation development and complementary functions.The transaction scale has been expanding,the investor composition has become more abundant,and institutional investors have also grown vigorously with the development of the capital market.In 2000,the Central government put forward the policy of "ultra normal development of institutional investors",and the development of institutional investors has won strategic support.Under the double promotion of policy and market,Chinese institutional investors have achieved great development in the kind,structure and scale,and their status in the capital market has been rising and become the leading forces in the capital market.Institutional investors are important subjects in the capital market,facing a lot of information and external impact.The limited attention theory holds that human attention is limited and can only focus on certain things rather than all things.Therefore,in the face of a large amount of information and external shocks,the problem of limited attention of investors will become more obvious,resulting in the relaxation of the regulation of holding companies.According to the agency theory,limited attention theory and stock price crash theory,the "distraction" of institutional investors will lead to the relaxation of regulation,and company executives will have more opportunities to hide the real information of the company for personal benefits,thus increasing the risk of company stock price crash.According to the above ideas,this paper draws on the method of Kempf,Manconi and Spalt(2017),constructs the institutional investor distraction index at the company level for empirical test,analyzes the impact of institutional shareholders’ distraction on the company stock price crash risk,and conducts group regression and intermediary mechanism test.The research results show that:(1)The increase in the degree of distraction of institutional investors will significantly increase the risk of corporate stock price crash.As institutional investors pay less attention to target companies,corporate executives have more incentive to hide bad news,and the risk of corporate stock price crash increases.(2)The positive correlation between investor distraction and stock price crash risk is more obvious in the sample of companies with weak governance.(3)Corporate information transparency has a partial mediating effect in the process of the impact of institutional investors’ distraction on stock price crash risk.When institutional investors’ distraction degree increases,corporate information transparency will decrease,thus increasing the risk of stock price crash.