Institutional Ownership And Stock Price Crash Risk
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Institutional Ownership And Stock Price Crash Risk
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Author :
language : en
Publisher: GRIN Verlag
Release Date : 2024-07-19
Institutional Ownership And Stock Price Crash Risk written by and has been published by GRIN Verlag this book supported file pdf, txt, epub, kindle and other format this book has been release on 2024-07-19 with Business & Economics categories.
Master's Thesis from the year 2024 in the subject Business economics - Investment and Finance, grade: 1,7, University of Hamburg, language: English, abstract: This study uses OLS regressions to analyze the impact of institutional ownership (IO) investment horizons on stock price synchronicity and crash risk for a sample of U.S. companies. Two main hypotheses are tested: (1) long-term (short-term) IO (LTIO) (STIO) are negatively (positively) related to stock price synchronicity, and (2) long-term (short-term) IO are negatively (positively) related stock price crash risk. Stock price synchronicity (SYNCH) measures how much firm-specific returns align with overall market returns, while crash risk (NCSKEW, DUVOL, COUNT) indicates the likelihood of a sudden, significant price drop. The theory posits that short-term investors, more prone to sell shares, provide weaker oversight, giving managers more freedom to influence cash flows and increasing synchronicity. In contrast, long-term investors establish stronger management relationships, reducing synchronicity through enhanced oversight. The findings reveal that both long-term and short-term IO positively impact synchronicity, contradicting the hypothesis for long-term IO. This aligns with literature suggesting institutional investors use superior information mainly for trading rather than management engagement. For crash risk, results support the agency theory: long-term IO is associated with reduced crash risk due to better monitoring, while short-term IO correlates with higher crash risk due to frequent trading and weaker oversight. These findings align with prior research, indicating that bad news is disclosed under long-term monitoring, causing abrupt price drops. During the 2008 financial crisis, average crash risk was significantly higher, especially for financial firms. The interaction between IO horizons and the crisis suggests complex dynamics needing further study, particularly the negative interaction of long-term and aggregated IO during recessions. Robustness checks, including firm fixed-effects regressions and variable changes, confirm primary findings but suggest cautious interpretation for long-term IO results. Limitations include a relatively short observation period (2000-2017), potential measurement biases in tax avoidance proxies (long-run cash effective tax rate (LRETR)), and unaddressed endogeneity concerns. Future research should explore evolving ownership structures, corporate social responsibility, and impacts of recent disruptions like the COVID-19 pandemic on crash risk.
Investor Heterogeneity And Negative Skewness In Stock Returns
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Author : Ramzi Benkraiem
language : en
Publisher:
Release Date : 2023
Investor Heterogeneity And Negative Skewness In Stock Returns written by Ramzi Benkraiem and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023 with categories.
We examine the relation between the probability of future stock price crash and investors' investment horizons. Using negative skewness as a proxy for firm-specific crash risk, we document a positive association between institutional ownership and stock price crash risk. The relation is, however, driven by short-term institutional investors, while the presence of long-term institutional investors has a negative effect on stock price crash risk. In addition, we find that the presence of short-term institutional investors induces corporate risk-taking behavior. Our results are robust to alternative model specifications, endogeneity concerns, and different measures of crash risk and proxies of investors' horizons.
Attention Distracted Institutional Investors And Stock Price Crash
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Author : Xiaoran Ni
language : en
Publisher:
Release Date : 2020
Attention Distracted Institutional Investors And Stock Price Crash written by Xiaoran Ni and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
Using the extreme returns of firms in unrelated industries of institutional shareholders' portfolios as exogenous variations in institutional investor distraction (Kempf et al., 2017), we find a positive and significant relation between institutional shareholder distraction and stock price crash risk. The effect is associated with weakened monitoring, and it becomes stronger when alternative corporate governance is weaker and when managers' incentives to hoard bad information are stronger. Managers reduce firms' accounting conservatism when institutional investors become distracted, which is evidence of an increased motivation to hoard bad news. Overall, our findings shed additional light on the important monitoring role of institutional investors in corporate governance.
Three Essays In Stock Price Crash Risk And Institutional Trading
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Author : Hung Dong Cao
language : en
Publisher:
Release Date : 2024
Three Essays In Stock Price Crash Risk And Institutional Trading written by Hung Dong Cao and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2024 with categories.
Despite a longstanding debate over the pros and cons of imposing legal liability on corporate directors and officers, there is limited research on how managerial litigation affects a firm0́9s future stock price crash risk. Essay 1 examines how the change in Nevada corporate law in 2001, which lowers the legal liability of corporate managers of Nevada-incorporated firms, affects the likelihood of future stock price crashes. We find that such a legal change leads to a decrease in stock price crash risk, and the effect is more pronounced for small, young, and weakly governed firms. Further analysis indicates that the decrease in crash risk is driven by reduced earnings management and enhanced quality of corporate information disclosures. Overall, our evidence suggests that lower managerial legal liability encourages managers to improve corporate information environment that decreases stock price crash risk. In Essay 2, exploiting the staggered adoption of data breach notification (DBN) laws, which obligate firms to disclose data breaches when they occur, as an exogenous shock to data breach disclosures, we find that the adoption of these laws leads to higher future stock price crash risk. The positive relation between DBN laws and crash risk is more pronounced for firms with weaker corporate governance, higher financial constraints, and higher information asymmetry. Our findings suggest that investors0́9 concerns about the consequences of data breaches and the vulnerability of breached firms0́9 data security heighten stock price crash risk. Essay 3 investigates the impact of psychological barriers on institutional trading behaviors. We find that net institutional demand is positively associated with proximity to the 52-week highs, while it is negatively associated with proximity to the historical highs. Conditioning these price-to-high ratios, we further show that institutional trading can strongly predict future stock returns. Overall, these findings support behavioral exploitation hypothesis, suggesting that institutional investors capitalize on other investors0́9 behavioral biases.
Corporate Social Responsibility And Stock Price Crash Risk
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Author : Yongtae Kim
language : en
Publisher:
Release Date : 2014
Corporate Social Responsibility And Stock Price Crash Risk written by Yongtae Kim and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
This study investigates whether corporate social responsibility (CSR) mitigates or contributes to stock price crash risk. Crash risk, defined as the conditional skewness of return distribution, captures asymmetry in risk and is important for investment decisions and risk management. If socially responsible firms commit to a high standard of transparency and engage in less bad news hoarding, they would have lower crash risk. However, if managers engage in CSR to cover up bad news and divert shareholder scrutiny, CSR would be associated with higher crash risk. Our findings support the mitigating effect of CSR on crash risk. We find that firms' CSR performance is negatively associated with future crash risk after controlling for other predictors of crash risk. The result holds after we account for potential endogeneity. Moreover, the mitigating effect of CSR on crash risk is more pronounced when firms have less effective corporate governance or a lower level of institutional ownership. The results are consistent with the notion that firms that actively engage in CSR also refrain from bad news hoarding behavior and thus reducing crash risk. This role of CSR is particularly important when governance mechanisms, such as monitoring by boards or institutional investors, are weak.
Institutional Investor Stability And Crash Risk
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Author : Jeffrey L. Callen
language : en
Publisher:
Release Date : 2013
Institutional Investor Stability And Crash Risk written by Jeffrey L. Callen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
This study tests two opposing views of institutional investors -- monitoring versus short-termism. We present evidence that institutional investor stability is negatively associated with one-year-ahead stock price crash risk, consistent with the monitoring theory of institutional investors but not the short-termism theory. Our findings are shown to be robust to alternative empirical specifications, estimation methods and endogeneity concerns. In addition, we find that institutional ownership by public pension funds (bank trusts, investment companies, and independent investment advisors) is significantly negatively (positively) associated with future crash risk, consistent with findings that pension funds more actively monitor management than other types of institutions.
Corporate Governance And Firm Specific Stock Price Crashes
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Author : Panayiotis C. Andreou
language : en
Publisher:
Release Date : 2019
Corporate Governance And Firm Specific Stock Price Crashes written by Panayiotis C. Andreou and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
We investigate whether four dimensions of corporate governance mechanisms, namely ownership structure, accounting opacity, board structure and process and managerial incentives, relate to 1-year-ahead stock price crash risk. Employing principal component analysis on the 21 attributes that comprise these four categories, we find that corporate governance explains overall between 13.1% and 23.0% of a one standard deviation in future crash risk. Further analysis reveals that transient institutional ownership, CEO stock option incentives and the percentage of directors that hold equity in the firm increase a firm's future stock price crash, whilst insiders' ownership, conditional accounting conservatism, board size and the presence of a corporate governance policy have the ability to mitigate crashes. The relations between these governance attributes and future crash risk are more pronounced in environments that accentuate agency risk. Our findings support the notion that sound corporate governance systems curb opportunistic behavior of managers to hide and accumulate bad news from outsiders.
Reit Crash Risk And Institutional Investors
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Author : Heng An
language : en
Publisher:
Release Date : 2016
Reit Crash Risk And Institutional Investors written by Heng An and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
This paper examines the relationship between the stock crash risk of REITs and different types of institutional investors. First, when we classify REIT institutional investors by their legal type, we find that the ownership of pension funds (bank trusts) is negatively (positively) related to REIT crash risk. In addition, the trading of investment behavior, we find that REIT crash risk is positively related to the trading of transient institutional investors, which trade frequently to maximize short-term gains. Moreover, the adverse impact of transient investors on REIT crash risk has worsened recently. These findings highlight the heterogeneous impacts of different types of institutional investors on REIT crash risk, which has important implications for REIT market participants and policymakers.
Religion And Stock Price Crash Risk
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Author : Jeffrey L. Callen
language : en
Publisher:
Release Date : 2013
Religion And Stock Price Crash Risk written by Jeffrey L. Callen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
This study examines whether religiosity at the county level is associated with future stock price crash risk. We find robust evidence that firms headquartered in counties with higher levels of religiosity exhibit lower levels of future stock price crash risk. This finding is consistent with the view that religion, as a set of social norms, helps to curb bad news hoarding activities by managers. Our evidence further shows that the negative relation between religiosity and future crash risk is stronger for riskier firms and for firms with weaker governance mechanisms measured by shareholder takeover rights and dedicated institutional ownership. To ensure that the stock price crashes are a consequence of bad news hoarding, we show that firms that restated accounting data and suffered a resulting stock price crash experience significantly larger income decreases and are less likely to be from a religious milieu by comparison to matched samples including firms that restated but did not suffer a stock price crash.
Market Volatility
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Author : Robert J. Shiller
language : en
Publisher: MIT Press
Release Date : 1992-01-30
Market Volatility written by Robert J. Shiller and has been published by MIT Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 1992-01-30 with Business & Economics categories.
Market Volatility proposes an innovative theory, backed by substantial statistical evidence, on the causes of price fluctuations in speculative markets. It challenges the standard efficient markets model for explaining asset prices by emphasizing the significant role that popular opinion or psychology can play in price volatility. Why does the stock market crash from time to time? Why does real estate go in and out of booms? Why do long term borrowing rates suddenly make surprising shifts? Market Volatility represents a culmination of Shiller's research on these questions over the last dozen years. It contains reprints of major papers with new interpretive material for those unfamiliar with the issues, new papers, new surveys of relevant literature, responses to critics, data sets, and reframing of basic conclusions. Included is work authored jointly with John Y. Campbell, Karl E. Case, Sanford J. Grossman, and Jeremy J. Siegel. Market Volatility sets out basic issues relevant to all markets in which prices make movements for speculative reasons and offers detailed analyses of the stock market, the bond market, and the real estate market. It pursues the relations of these speculative prices and extends the analysis of speculative markets to macroeconomic activity in general. In studies of the October 1987 stock market crash and boom and post-boom housing markets, Market Volatility reports on research directly aimed at collecting information about popular models and interpreting the consequences of belief in those models. Shiller asserts that popular models cause people to react incorrectly to economic data and believes that changing popular models themselves contribute significantly to price movements bearing no relation to fundamental shocks.