The Impact of the Cross-Shareholding Network on Extreme Price Movements: Evidence from China

24 Pages Posted: 23 Dec 2019

See all articles by Jie Cao

Jie Cao

Central South University - School of Business

Fenghua Wen

Independent

Date Written: 2019

Abstract

By using information about the ownership structure of listed companies from 2004 to 2016, we construct the cross-shareholding network for each year and examine the effects of the network position of a firm on extreme price movement. The results show that firms that are in more central positions exhibit less extreme price movements because they have more connections with other firms, because they can collect or disseminate information more easily through their connections and because their price information transparency is higher. Moreover, we examine the different effects of network structure on extreme upward and downward movements in price and find that the centrality of a firm more strongly inhibits extreme price upward movements than it does downward movements. Our results suggest that a firm’s position in the cross-shareholding network can influence its extreme price movements, which gives us new insights into extreme stock market movements and provides useful suggestions for future financial regulations.

Keywords: extreme price movements; cross-shareholding networks; network position; centrality; information transparency

Suggested Citation

Cao, Jie and Wen, Fenghua, The Impact of the Cross-Shareholding Network on Extreme Price Movements: Evidence from China (2019). Journal of Risk 22(2), 79–102 DOI: 10.21314/JOR.2019.423 . Available at SSRN: https://ssrn.com/abstract=3507998

Jie Cao

Central South University - School of Business ( email )

Changsha, Hunan 410083
China

Fenghua Wen (Contact Author)

Independent ( email )

No Address Available

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