Cross-shareholding promotes price synchronization and reduces price lag. More importantly, this effect on price informativeness is evident for large companies and during market downturns. In general, the relationship between cross-ownership structure and stock price informativeness exists clearly. This paper investigates the impact of share cross-ownership on stock prices as a measure of price informativeness from companies listed on the Chinese stock exchange. The paper has learned an overview of cross-ownership and the stock market in China through jurisprudence analysis and comparative jurisprudence method. At the same time, the author also discusses the positive effects of regulation and cross-ownership structure on stock prices to better understand the relationship between cross-ownership and price dynamics through the impact of cross-ownership on the information environment. A notable point that the paper also discusses is the advantages of symmetric cross-ownership compared to the process of merger of joint stock companies to determine the balance between market efficiency and the social welfare loss brought about by symmetrical cross-ownership. From there, the paper will evaluate the influence of cross-ownership in Vietnamese and Philippine laws through agency theory and corporate governance models, and will finally make some recommendations for Philippine and Vietnamese laws.
Amundsen, E. S., & Bergman, L. (2002). Will cross-ownership reestablish market power in the Nordic power market? The Econometrics Journal, 23(2), 73–95.
Ang, J. S., Constand, R., Mathur, I., & Booth, G. G. (2002). The portfolio behavior of Japanese corporations’ stable shareholders. Journal of Multinational Financial Management, 12(2), 89–106.
Anton, M., Ederer, F., Ge, M., & Schmalz, M. C. (2021). Innovation: the bright side of common ownership?
Azar, J., Schmalz, M. C., & Tecu, I. (2018). Anticompetitive effects of common ownership. The Journal of Finance, 73(4), 1513-1565.
Boubaker, S., Mansali, H., & Rjiba, H. (2014). Large controlling shareholders and stock price synchronicity. Journal of Banking & Finance, 40(1), 80–96.
Brockman, P., & Yan, X. S. (2009). Block ownership and firm-specific information. Journal of Banking & Finance, 33(2), 308–316.
Brooks, C., Chen, Z., & Zeng, Y. (2018). Institutional cross-ownership and corporate strategy: The case of mergers and acquisitions. Journal of Corporate Finance, 48, 187–216.
Chang, X. H., & Wang, H. Y. (2017). Cross-shareholdings structural characteristic and evolution analysis based on complex network. Discrete Dynamics in Nature and Society, 2017, 1–8. https://doi.org/10.1155/2017/5801386
Crawford, S. S., Roulstone, D. T., & So, E. C. (2012). Analyst initiations of coverage and stock return synchronicity. Atmospheric Research, 87(5), 1527–1553.
Dong, Y., Li, O. Z., Lin, Y., & Ni, C. (2016). Does information processing cost affect firm-specific information acquisition? Evidence from XBRL adoption. Journal of Financial and Quantitative Analysis, 51(2), 435–462.
Edmans, A., Levit, D., & Reilly, D. (2019). Governance under common ownership. The Review of Financial Studies, 32(7), 2673-2719.
Eng, L. L., Fang, H., Tian, X., Yu, T. R., & Zhang, H. (2019). Financial crisis and real earnings management in family firms: A comparison between China and the United States. Journal of International Financial Markets Institutions and Money, 59, 184–201.
Fama, E. F., & French, K. R. (2015). A five-factor asset pricing model. Journal of Financial Economics, 116(1), 1–12.
Fischer, T. (2013). No-arbitrage pricing under systemic risk: Accounting for cross-ownership. Mathematical Finance, 24(1), 97–124.
Ghatak, M., & Kali, R. (2001). Financially interlinked business groups. Journal of Economics & Management Strategy, 10(4), 591-619.
Gu, M., Kang, W., & Xu, B. (2018). Limits of arbitrage and idiosyncratic volatility: Evidence from China stock market. Journal of Banking & Finance, 86, 240–258.
Harford, J., Jenter, D., & Li, K. (2011). Institutional cross-holdings and their effect on acquisition decisions. Journal of Financial Economics, 99(1), 27–39.
He, J. J., & Huang, J. (2017). Product market competition in a world of cross-ownership: Evidence from institutional blockholdings. The Review of Financial Studies, 30(8), 2674-2718.
He, Q., Cheng, B., & Wen, J. (2019). Does aggregate insider trading predict stock returns in China? Journal of Financial Economics, 24(2), 922–942.
Jin, L., & Myers, S. C. (2006). R2 around the world: New theory and new tests. Journal of Financial Economics, 79(2), 257–292.
Lee, D. W., & Liu, M. H. (2011). Does more information in stock price lead to greater or smaller idiosyncratic return volatility? Journal of Banking & Finance, 35(6), 1563–1580.
Li, X., Qiao, P., & Zhao, L. (2019). CEO media exposure, political connection and Chinese firms’ stock price synchronicity. International Review of Economics and Finance, 63, 61–75.
Li, X. L., Li, X., & Si, D. K. (2019). Asymmetric determinants of corporate bond credit spreads in China: Evidence from a nonlinear ARDL model. The North American Journal of Economics and Finance, 52, 101,109.
Liu, J., Robert, F. S., & Yuan, Y. (2019). Size and value in China. Journal of Financial Economics, 134(1), 48–69.
Lo, A. W. (2004). The adaptive markets hypothesis. Journal of Portfolio Management, 30(5), 15–29.
López, Á. L., & Vives, X. (2019). Overlapping ownership, R&D spillovers, and antitrust policy. Journal of Political Economy, 127(5), 2394-2437.
Kim, J. B., Li, Y., & Zhang, L. (2011). CFOs versus CEOs: Equity incentives and crashes. Journal of financial economics, 101(3), 713-730.
Ma, Y. Y., Zhuang, X. T., & Li, L. X. (2011). Research on the relationships of the domestic mutual investment of China based on the cross-shareholding networks of the listed companies. Physica A, 390(4), 749–759.
Nartea, G., Wu, J., & Liu, Z. (2013). Does idiosyncratic volatility matter in emerging markets? Evidence from China. Journal of International Financial Markets Institutions and Money, 27(3), 137 160.
Wen, F.-H., Gong, X., Chao, Y., & Chen, X. (2014a). The effects of prior outcomes on risky choice: Evidence from the stock market. Mathematical Problems in Engineering, 2014, 1–8. https://doi.org/10.1155/2014/272518
Wu, K., Fu, Y., & Kong, D. (2022). Does the digital transformation of enterprises affect stock price crash risk? Finance Research Letters, 48, 102,888.
Zhang, Q., Cai, C. X., & Keasey, K. (2013). Market reaction to earnings news: A unified test of information risk and transaction costs. Journal of Accounting and Economics, 56(2–3), 251–266.