Foreign Institutional Ownership, Risk-Taking, and Crash Risk Around the World

An, Zhe; Huang, Garland; Li, Donghui; Xiao, Shangbin

doi:10.2139/ssrn.2406743

Cited by 4 publications

(3 citation statements)

References 54 publications

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“…Our findings are most closely related to research on the role of institutional investors in shaping crash risk (Z. An et al, 2014; H. An & Zhang, 2013; Andreou et al, 2016; Callen & Fang, 2013). These studies find a generally positive, but somewhat mixed, relation between institutional ownership and crash risk.…”

Section: Introductionsupporting

confidence: 79%

“…These contrasting views yield different predictions and mixed evidence on the relation between different types of institutional investors and crash risk (Z. An et al, 2014; H. An & Zhang, 2013; Andreou et al, 2016; Callen & Fang, 2013). The overall positive relation between total institutional ownership and crash risk documented in these studies suggests that the majority of institutional investors do not serve as effective monitors.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

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Common institutional ownership and stock price crash risk

Chen,

Ma,

et al. 2023

Contemporary Accting Res

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This paper presents new evidence on the economic benefits arising from common institutional ownership. We find a negative and significant effect of common institutional ownership on stock price crash risk. This effect is robust to a battery of robustness checks and is causal according to some identification tests, including difference‐in‐differences analyses on financial institution mergers. We find evidence that the negative effect is attributable to the monitoring role of common institutional owners—a role that is enabled by common owners’ lower information processing cost and greater monitoring incentives owing to governance externalities. We also find that common owners negatively influence crash risk through constraining bad news hoarding and that common owners are more likely to force CEO turnover when a firm has higher crash risk. Overall, our results suggest that common institutional shareholders play a unique and effective monitoring role that fends off stock price crashes.This article is protected by copyright. All rights reserved.

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Section: Introductionsupporting

confidence: 79%

Section: Hypothesis Developmentmentioning

confidence: 99%

Common institutional ownership and stock price crash risk

Chen,

Ma,

et al. 2023

Contemporary Accting Res

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“…Reputation is socially constructed from non-observers (Suchman, 1995). The investor community often has positive perceptions of institutional ownership (Shi et al, 2017), because of its ability to lessen management aggressiveness (An et al, 2014;Ying et al, 2017). The investor community believes that foreign institutional ownership will create an atmosphere that encourages management to innovate (Bena et al, 2017), minimizing local culture and economic policy uncertainty (Deng et al, 2018) Thus, H3: Management aggressiveness with moderation of foreign institutional ownership affects firm value.…”

Section: Introductionmentioning

confidence: 99%

Does the Market Respond to Management Aggressiveness?

Kristabel

Wijaya

2021

Akrual J. Akunt.

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This study aims to examine market behavior towards management aggressiveness from the perspective of screening theory. Screening theory assumes that the market has limited information on companies. This study uses 852 companies taken from companies listed on the IDX from 2016 to 2018. This study provides empirical evidence about the response of capital markets to management aggressiveness. Over-aggressive management is very dangerous for the company. For this reason, the researcher also examines whether the board of commissioners, foreign institutional ownership, and the presence of auditors are capable of improving market response to management aggressiveness. The results provide evidence that the market does not respond to management aggressiveness. It means that the screening theory is able to explain that the market does not consider whether management is aggressive or not in making their investment decisions. However, the existence of foreign institutional ownership as well as the existence of auditors is something that is considered by the market. The market has responded positively to their existence in suppressing management aggressiveness. Thus, Screening theory proves that the market has limited information about company management. However, they require different information from that provided by management in making strategic decisions.

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