The Inhibition of Institutional Investor Clique on the Tunneling Behavior

Abstract

The development of communication technology has accumulated a large amount of data in the field of finance, and analyzing this data can better portray the behavior of financial entities, which is crucial to the progress of corporate finance. Based on the theory of social network and the classic “prisoner’s dilemma” model, this article finds that institutional investors will cooperate to participate in the governance of the listed companies. Then, by using the Louvain algorithm, institutional investor cliques have been derived from institutional investor networks based on nonfinancial listed companies in China between 2007 and 2020. The study uncovers the inhibition effect of the institutional investor clique on the tunneling behavior of the listed companies, and the higher the shareholding ratio and centrality of the institutional investor clique, the stronger its inhibitory strength. This paper extends the concepts and methods from the field of information communication to the analysis of financial institutional investors, offering a theoretical and empirical foundation for the interdisciplinary research of network algorithms and finance.