Skip to main content
Article
Stock Price Synchronicity, Crash Risk, and Institutional Investors
Journal of Corporate Finance
  • Heng An, University of North Carolina at Greensboro
  • Ting Zhang, University of Dayton
Document Type
Article
Publication Date
6-1-2013
Abstract
Both stock price synchronicity and crash risk are negatively related to the firm's ownership by dedicated institutional investors, which have strong incentive to monitor due to their large stake holdings and long investment horizons. In contrast, the relations become positive for transient institutional investors as they tend to trade rather than monitor. These findings suggest that institutional monitoring limits managers' extraction of the firm's cash flows, which reduces the firm-specific risk absorbed by managers, thereby leading to a lower R2. Moreover, institutional monitoring mitigates managerial bad-news hoarding, which results in a stock price crash when the accumulated bad news is finally released.
Inclusive pages
1–15
ISBN/ISSN
0929-1199
Comments

Permission documentation is on file.

Publisher
Elsevier
Peer Reviewed
Yes
Citation Information
Heng An and Ting Zhang. "Stock Price Synchronicity, Crash Risk, and Institutional Investors" Journal of Corporate Finance Vol. 21 (2013)
Available at: http://works.bepress.com/ting-zhang/12/