Old Friends, New Risks: How Alumni Ties Undermine Stock Price Resilience

ABSTRACT This study investigates the impact of holdings by alumni‐connected funds (i.e., funds whose managers share educational ties with a firm's top executives) on firms' stock price resilience among China's A‐share listed firms. We find that such holdings significantly undermine firms' stock price resilience. The adverse effect operates primarily through two mechanisms, namely heightened market mispricing (shock resistance channel) and decreased liquidity (post‐shock recovery channel). Moreover, the adverse effect is more pronounced under higher investor risk aversion, and attenuated by institutional investors' site visits and higher investor attention. We also document that diminished price resilience amplifies managerial short‐termism, curtails firms' long‐term investment, and ultimately impairs their long‐term growth potential. Overall, our findings highlight that social ties embedded in investment relationships can undermine market stability and erode long‐term firm value.