Shareholding Network of Institutional Investors and the Information Efficiency of Capital Market: Evidence From China

A higher efficient capital market and direct financing environment are key to excellent enterprise performance and high-quality economic development in China. In recent years, institutional investors have gradually significantly impacted market information efficiency, while the existing studies still offer different conclusions. Given this, firstly, we chose the social network analysis as the study method, taking the open-ended equity mutual funds in the A-share stock market from 2010 to 2019 as samples, constructing the shareholding networks by taking the top ten bulk-holding stocks in every sample fund's annual report as the connection. Then, we chronologically reveal the characteristics of those networks, such as scale, density, centrality, and so on. Lastly, we empirically test the influence of the institutional investors embedded in the shareholding networks on the information efficiency, and so does the robustness check. The results show that the shareholding networks are gradually expanding in scale and increasing in density. Furthermore, institutional investors can improve stock price informativeness and promote market information efficiency through a shareholding network, and the higher the network location of institutional investors, the greater the information effect. The conclusions based on the systemic view not only enrich the research on the information function of institutional investors, broaden the field of social network theory, but also provide guidance for regulating institutional investors and improving market transparency.