Abstract: From the perspective of foreign investors in the advanced markets expecting improvements of the corporate information environment in the emerging markets and reducing market speculation, this paper takes the advantage of the policy shock of Shanghai-Hong Kong Stock Connect to investigate the influence of foreign investors on the stock price crash risks. The results show that Shanghai-Hong Kong Stock Connect has indeed reduced the stock price crash risks of the underlying stocks; as for the stocks that are not traded by foreign investors before Shanghai-Hong Kong Stock Connect or that are traded actively by foreign investors after Shanghai-Hong Kong Stock Connect, the effect of Shanghai-Hong Kong Stock Connect is all the more significant. If the company has a higher level of earnings management, foreign investors can play a more active role in improving the company’s information environment, and the stock price crash risks can be more significantly reduced. It is mainly through the information trading system, not the supervising system, that the foreign investors can reduce the stock price crash risks. Therefore, it is of great significance to promote the further opening-up of the capital markets, so as to improve the market transparency and capital allocative efficiency, and enhance the capability of the capital market to serve the real economy.

Key words: foreign investor; emerging market; information environment; market speculation; Shanghai-Hong Kong stock connect; stock price crash risk