Abstract
This study examines how institutional investor investment horizons impact stock price crash risk for China’s A-share firms from 2007 to 2019. Long-term investments by institutions significantly mitigate risk by curbing managerial myopia, enhancing transparency, and improving accountability, thus deterring self-serving behavior. Moreover, long-term shareholding and professional investment indeed strengthen institutional investor supervision and corporate governance, reducing stock price crash risk. This paper also discusses institutional investor characteristics, such as herding behavior, information competition, and cliques, as well as external environmental factors, such as investor protection and external monitoring, on institutional investor horizons. Furthermore, effective internal governance, such as diversity of board sources and the diligence of audit committees, can amplify the risk reduction effects of long-term institutional investment.
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