The Evidence of Institutional Investors' Herd Behavior and the Research on Market Simulation

In the context of vigorously developing China＇s securities market institutional investors in the period of economic transition, this paper does the empirical research on the herd behavior from the view of the interaction between individual and institutional investors. This paper adopts the standard deviation of trading volume the cross-section to measure herd behavior. The results show that no matter what the market is in bull status and bear status, institutional investors perform herd behavior and with the expansion of the shareholding scale in a bull market, the herd behavior is higher, which suggests that the vigorous development of institutional investors has not eliminated herd behavior. This paper further confirms that there is the endogenous volatility in the market based on an artificial stock market. Finally it is demonstrated the herd behavior of institutional investors cause abnormal fluctuations in the market.

Valuation Effects of US-China Trade Conflict:The Role of Institutional Investors

Employing an event study approach to the US-China trade conflict,we found that this conflict had an overall negative effect on the stock market performance of Chinese listed firms,but firms with institutional investor holdings(IIH)exhibited smaller losses than their counterparts in response to a US presidential memo announcing a trade conflict.We also examined the heterogeneous effects of this conflict on firms.The positive effect of IIH was larger for firms with foreign exposure and firms located in provinces with a higher degree of marketization.Institutional investor holdings helped to reduce firms'cost of refinancing and improved their long-run performance given the same shortterm loss in response to the US presidential announcement during the trade conflict.These findings explain the role of institutional investors in alleviating the effects of the US-China trade conflict and achieving financial stability from a micro-perspective.The results have policy implications for corporate governance and financial market stabilization in response to trade policy uncertainty.

Foreign institutional investors and stock return comovement

We investigate whether foreign institutional investors facilitate firm-specific information flow in the global market. Specifically, using annual institutional ownership data from firms across 40 countries, we find that foreign institutional ownership is negatively associated with excess stock return comovement. Our results are more pronounced when foreign institutional investors originate from common-law countries and hold a large equity stake in invested firms; and when the invested firms are located in civil-law countries. Overall, the evidence suggests that foreign institutional investors from countries with strong investor protection play an important informational role in mitigating excess stock return comovement around the world.

Optimal IPO Mechanism with Retail Investors and Two Asymmetric Institutional Investors

The authors construct an IPO selling mechanism with risk neutral retail investors, and two institutional investors that are better-informed and less-informed, respectively. In the mechanism,in addition to the main constraints such as the individual rationality(IR), the incentive compatibility(IC), and the feasibility constraint(FC), the authors consider two more typical constraints: There is a lower bound and no bound for allocation of the shares to two institutional investors. The authors derive the explicit expression of the optimal allocation of the shares to the investors. Under the lower bound constraint,the optimal mechanism will encourage the better-informed bidder to report sufficiently higher signal in order to get shares. If he gets allocation of shares, then the higher signal he reports,the more shares he will get, and the more the issuer's expected maximum revenue will be.

Testing the short-termism hypothesis:Institutional investors,family control,and capital spending in Malaysia

We have examined whether institutional ownership and family control in Malaysia are linked to capital spending.Using panel data from 220 listed companies in Malaysia,we showed that institutional ownership is positively associated with capital expenditure(CAPEX).Consistent with institutional investors’monitoring role in corporate governance,the results indicate that this relationship was driven by the presence of growth opportunities.However,we found that family control was negatively associated with CAPEX.Additional analyses showed that this relationship was moderated by company size.While larger family firms invest less in CAPEX,smaller family firms invest more in CAPEX,indicating that the benefits of lower agency conflicts in family firms hold only for smaller firms.Our results are robust to alternative empirical measurements that account for firm characteristics and the endogeneity of institutional shareholding.

Do Institutional Investors Drive Financialization of Real Sectors?

The trend that China's economy is being"off the real to the virtual"is a typical fact in recent years.A large number of firms invest and hold financial asscts,the investing and profit-generating channels of the real sectors are becoming more and more financialized.By utilizing sample of Chinese A-share manufacturing firms from the year of 2007 to 2015,and using fixed effect model,this paper investigates the driving factor of the financialization of real sectors.The results show that:(1)institutional investors,overall,drive the financialization of real sectors;(2)instiutional investors are heterogeneous,that is,long-term institutional investors do not show a significant correlation with the financialization of real sectors;however,short-term institutional investors significantly drive the financialization of real sectors;(3)the results.of further investigation show that the driving effect of institutional investors on financialization is more significant in state owned firms than that in private firms.The findings have implications as follows:guiding the investment behavior of institutional investors,leading financial sector to serve the real economy,promoting financial structure reform.

The Information Efficiency of QFII's Investment in China's Capital Market

This paper takes stock price synchronization and price delay as indicators of information efficiency, and uses mixed cross-sectional data of listed companies into which Qualified Foreign Institutional Investors(QFII) have made investments, to study the impact of QFII's investment behaviors on the information efficiency of China's stock market. The results show that QFII's investments can improve the information efficiency of China's stock market, but its impact is varied. The impact of QFII's investments on market information efficiency is more significant in bear markets than in bull markets, the impact on private enterprises is more significant than on state-owned enterprises, and the impact on Small and Medium Enterprises(SME) market is more significant than in main board market. Further research also finds that QFII has a certain threshold effect on the information efficiency of China's stock market. This research paper provides a problem-solving perspective for China's capital markets to achieve information efficiency through opening up, and at the same time warns against financial risks.

The impact of investor structure on stock price crash sensitivity:Evidence from China's stock market

Stock price crash sensitivity refers to the conditional probability of a stock crash when the market collapses.It focuses on individual stocks'sensitivity to the market crash and can affect stock pricing significantly.Although the crash sensitivity of China's stock market is very high as a whole(Weigert,2016),different individual stocks show varying degrees of crash sensitivity.This paper,adopting the perspective of institutional investors,explores the reasons for the difference in crash sensitivity in China's stock market,and finds that:First,institutional investors'shareholdings is positively related to firms'stock price crash sensitivity.However,after dividing institutional investors into professional(represented by financial institutions)and non-professional institutional investors(represented by general legal persons),we find that only professional institutional investors'shareholdings is negatively related to firms'stock price crash sensitivity.Second,the impact of professional institutional investors on the crash sensitivity is influenced by stock liquidity and media sentiment:when the stock liquidity of listed companies is good or the media sentiment is strong,the negative impact of professional institutional investors on the crash sensitivity is accordingly high.This paper,by highlighting the investor structure,attempts a pioneering exploration of the influencing factors of the difference in stock price crash sensitivity in China.Our empirical results enrich research on stock price crash sensitivity and the heterogeneity of institutional investors.They can also serve to guide regulatory authorities'development of institutional investors and efforts to maintain market stability.

Are all investment decisions to subscribe to new stocks mindless?Investor heterogeneity and behavior in the process of subscribing to new stocks

The IPO process is a way for companies to improve their corporate governance and for investors to assess company quality.This paper posits that investor choices vary with differences in investment ability and experience.Three groups of investors with large holdings,namely individual investors,bluechip institutional investors and underperforming institutional investors,are compared by their use of three types of corporate governance information:board characteristics,equity structure and affiliated relationships.Overall,institutional investors make greater use of corporate governance information than individual investors,with blue-chip institutional investors making the greatest use.Further,bull-bear markets exert a significant influence on the behavior of both individual and underperforming institutional investors.These results enrich the IPO literature and contribute to optimal social fund allocation in the stock market.

The impact of the Social Security Fund on auditor litigation risk

In this study,we examine the effect of the Social Security Fund on auditor litigation risk.Using audit fees as a proxy for auditor perceptions of litigation risk,we find that the Social Security Fund significantly reduces auditor litigation risk.Furthermore,we show that the Social Security Fund influences auditor litigation risk through reducing both the audit risk and the business risk of public companies.In addition,the impact of the Social Security Fund for reducing auditor litigation risk is more obvious in the group of firms with low levels of internal governance,which indicates that the Social Security Fund plays an important governance role as a high-quality institutional investor.In summary,we verify that the Social Security Fund,when acting as an institutional investor,plays an important role in corporate governance,and that it helps to reduce auditor litigation risk.Our results provide empirical support for expanding the governance role of the Social Security Fund as an institutional investor in China’s A-share market.

RULE FOR PREFERRED STOCK IN CHINA： OVERTHROW OF THE PRINCIPLE OF ＂EQUAL SHARES, EQUAL RIGHTS＂？ ——FROM A COMPARATIVE PERSPECTIVE

The principle of ＂equal shares, equal rights＂ was established by the Company Law of 1993 of the People＇s Republic of China. At the initial stage only issuance of common stocks was allowed and the issuance of preferred stocks was interpreted as prohibited. The Company Law of 2006 has changed the rigidity of provisions of the Company Law of 1993 and laid down the legal foundation for issuance of preferred stock. The Rule for Administration of the Pilot Project for Preferred Stocks released on March 21, 2014 by the China Securities Regulatory Commission started the issuance of the preferred stocks in the Chinese capital market. The establishment of the legal system for issuance of preferred stock in China is not the symbol of overthrowing the principle of ＂equal shares, equal rights,＂ but the expansion and development of the principle of＂equal shares, equal rights＂ in a new era.