The Information Advantage of Industry Common Blockholders and Its Stabilizing Effect on Stock Price Crash Risk

46 Pages Posted: 6 Jul 2021 Last revised: 13 Sep 2021

See all articles by Qingyuan Li

Qingyuan Li

Wuhan University - School of Economics and Management

Xiaoran Ni

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE); Xiamen University - School of Economics

P. Eric Yeung

Cornell University - Samuel Curtis Johnson Graduate School of Management

David Yin

Miami University of Ohio

Date Written: September 12, 2021

Abstract

Institutional investors’ common blockholdings within an industry produce an information advantage, allowing them to differentiate between the industry-wide and firm-specific nature of bad news released by peer firms and avoiding selling on false spillover signals (i.e., “panic exit”), which in turn reduces future stock price crash risk. This evidence is in sharp contrast with the evidence that total institutional ownership increases firm-level stock price crash risk. Our study highlights the economic value of common owners in the stock markets: Their information advantage provides a stabilizing effect against contagion.

Keywords: Institutional Investor; Blockholder; Common Ownership; Stock Price Crash Risk; Contagion

JEL Classification: G12, G14, G34, M41

Suggested Citation

Li, Qingyuan and Ni, Xiaoran and Yeung, P. Eric and Yin, David, The Information Advantage of Industry Common Blockholders and Its Stabilizing Effect on Stock Price Crash Risk (September 12, 2021). Available at SSRN: https://ssrn.com/abstract=3871539 or http://dx.doi.org/10.2139/ssrn.3871539

Qingyuan Li

Wuhan University - School of Economics and Management ( email )

Wu Han, Hu-Bai 430072
China

Xiaoran Ni (Contact Author)

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE) ( email )

D 204, Economics Building
Xiamen, Fujian 361005
China

Xiamen University - School of Economics ( email )

China

P. Eric Yeung

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

David Yin

Miami University of Ohio ( email )

Oxford, OH 45056
United States

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