State ownership, implicit government guarantees, and crash risk: Evidence from China

Ding, Mingfa; He, Zhongda; Jia, Yuecheng; Shen, Mi

doi:10.1016/j.pacfin.2020.101470

Cited by 23 publications

(14 citation statements)

References 52 publications

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Section: Introductionmentioning

confidence: 64%

“…Second, we provide new mechanisms that explain the negative relationship between state ownership and crash risk, which expands the channels discussed in Ding et al (2021). Ding et al (2021) document that state ownership reduces stock price crash risk, and they raise two main mechanisms that might explain the relationship between state ownership and stock price crash risk. One is the information effect which suggests that state ownership may mitigate information hoarding if the government can play the monitoring role, and therefore, reduce stock price crash risk.…”

Section: Introductionmentioning

confidence: 64%

“…Second, we provide new mechanisms that explain the negative relationship between state ownership and crash risk, which expands the channels discussed in Ding et al. (2021).…”

Section: Introductionmentioning

confidence: 81%

“…The second is the implicit guarantee effect which indicates that if investors perceive state ownership as an implicit government guarantee to provide different forms of “tangible” support when firms experience financial instability especially during the recessionary periods, investors may be less likely to sell their stocks, leading to lower crash risk. Ding et al. (2021) provide empirical evidence to reject the information hoarding channel, and instead, they find the impact of state ownership on crash risk occurs through the implicit government guarantee effect.…”

Section: Introductionmentioning

confidence: 97%

“…(2021). Ding et al. (2021) document that state ownership reduces stock price crash risk, and they raise two main mechanisms that might explain the relationship between state ownership and stock price crash risk.…”

Section: Introductionmentioning

confidence: 99%

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State control and stock price crash risk: new evidence of the conservatism of state-owned enterprises

Xie

Anderson

Chi

et al. 2022

IJMF

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PurposeThis paper examines the impact of state control on stock price crash risk given whether and how ownership structure affects stock price crash risk is relatively underexplored.Design/methodology/approachThe sample includes 2,285 Chinese firms listed in the Shanghai and Shenzhen Stock Exchanges. Panel data is used for conducting the analysis and endogeneity is addressed with instrumental variable estimation and by testing how stock price crash risk is affected when the ultimate controller changes from a private-owned company to a state-owned enterprise.FindingsThe authors find that state control is negatively associated with future stock price crash risk. The mechanism analysis shows that state control reduces stock price crash risk through the implementation of conservative corporate policies. Furthermore, the impact of state control is more pronounced with more intensive state involvement, e.g. in strategic industries and when a company's ultimate controller is a non-corporate government agency or the central government.Originality/valueThis paper enriches the literature on the controversy of the role of state control and the results of this study highlight the importance of the conservatism of state control on reducing stock return tail risk. The authors also add to the literature on the importance of the policy-risk sharing effect of state ownership.

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Section: Introductionmentioning

confidence: 64%

Section: Introductionmentioning

confidence: 64%

“…Second, we provide new mechanisms that explain the negative relationship between state ownership and crash risk, which expands the channels discussed in Ding et al. (2021).…”

Section: Introductionmentioning

confidence: 81%

Section: Introductionmentioning

confidence: 97%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

State control and stock price crash risk: new evidence of the conservatism of state-owned enterprises

Xie

Anderson

Chi

et al. 2022

IJMF

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show abstract

Board network and ESG performance: Evidence from China

Shu,

Chiang,

2024

Corp Soc Responsibility Env

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As ESG (Environmental, Social, and Governance) principles increasingly shape the trajectory of global economic and societal sustainability, our study delves into how a firm's network dynamics influence its ESG performance within the Chinese landscape spanning from 2011 to 2020. Drawing insights from agency theory, resource dependence theory, and social network theory, we uncover a notable correlation between board interlocking and ESG performance. This correlation suggests that well‐connected directors can potentially enhance a firm's ESG performance by facilitating information gathering, monitoring, advising, and leveraging influence to address stakeholders' concerns. Moreover, our analysis reveals that the characteristics of ownership structure, as gauged by indicators such as institutional ownership, control‐cash flow wedge, and state‐owned ownership, serve as positive moderators in this relationship. Conversely, board structure, as evaluated by board independence, does not exhibit a significant moderating effect. Additionally, we uncover noteworthy mediating effects of firm size and institutional shareholding on the relationship between board interlocking and ESG performance. Importantly, our findings hold robust across various sensitivity analyses, including alternative model specifications, variable definitions, and strategies to mitigate potential endogeneity concerns.

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Which implied volatilities contain more information? Evidence from China

Wang

2023

Int. J Fin Econ

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This paper aims to examine the information capacity of implied volatility (IV) estimated with model‐based and model‐free methods. Among the model‐free approaches, we further divide them into direct estimation (DE) and indirect estimation (INDE) approaches according to the computational process. We study the predictability of different implied volatilities on realized volatility over various forecasting horizons based on the Chinese option data. The out‐of‐sample results indicate that all the IVs contain the information transmitted by option market, and have predictive ability on the realized volatility. Using three different loss functions, we find that the implied volatilities estimated with DE approach contain more information. When considering different market scenarios, we find model‐based implied volatility performs best during the stable period and the DE approach always works well no matter the investor sentiment is normal or abnormal. Moreover, we also discuss the predictability of implied volatility on crash risk. Our results remain robust by using alternative realized volatility and alternative rolling windows.

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State ownership, implicit government guarantees, and crash risk: Evidence from China

Cited by 23 publications

References 52 publications

State control and stock price crash risk: new evidence of the conservatism of state-owned enterprises

State control and stock price crash risk: new evidence of the conservatism of state-owned enterprises

Board network and ESG performance: Evidence from China

Which implied volatilities contain more information? Evidence from China

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