Search results

This study aims to explore the relationship between chief executive officer (CEO) power and stock price crash risk in India. Furthermore, it seeks to analyse how insider trades may moderate the impact of CEO power on stock price crash risk.

A study of 236 companies from the S&P BSE 500 Index (2014–2023) have been analysed through pooled ordinary least square (OLS) regression in the baseline analysis. To enhance the results' reliability, robustness checks include alternative methodologies, such as panel data regression with fixed-effects, binary logistic regression and Bayesian regression. Additional control variables and alternative crash risk measure have also been utilised. To address potential endogeneity, instrumental variable techniques such as two-stage least squares (IV-2SLS) and difference-in-difference (DiD) methodologies are utilised.

Stakeholder theory is supported by results revealing that CEO power proxies like CEO duality, status and directorship reduce one-year ahead stock price crash risk and vice versa. Insider trades are found to moderate the link between select dimensions of CEO power and stock price crash risk. These findings persist after addressing potential endogeneity concerns, and the results remain consistent across alternative methodologies and variable inclusions.

This study significantly advances research on stock price crash risk, especially in emerging economies like India. The implications of these findings are crucial for investors aiming to mitigate crash risk, for corporations seeking enhanced governance measures and for policymakers considering the economic and welfare consequences associated with this phenomenon.

This study examines the influence of stock liquidity on stock price crash risk and the moderating role of institutional blockholders in Vietnam’s stock market.

Crash risk is measured by the negative coefficient of skewness of firm-specific weekly returns (NCSKEW) and the down-to-up volatility of firm-specific weekly stock returns (DUVOL). Liquidity is measured by adjusted Amihud illiquidity. The two-stage least squares method is used to address endogeneity issues.

Using firm-level data from Vietnam, we find that crash risk increases with stock liquidity. The relationship is stronger in firms owned by institutional blockholders. Moreover, intensive selling by institutional blockholders in the future will positively moderate the relationship between liquidity and crash risk.

Since stock liquidity could exacerbate crash risk through institutional blockholder trading, firm managers should avoid bad news accumulation and practice timely information disclosures. Investors should be mindful of the risk associated with liquidity and blockholder trading.

We contribute to the literature by showing that the activities of blockholders could partly explain the relationship between liquidity and crash risk. High liquidity encourages blockholders to exit upon receiving private bad news.

The aim of this paper is to provide additional insights on the association between real earnings management (REM) and crash risk, particularly from the perspective of an emerging market economy. It also examines the moderation role that internal and external corporate governance may play in this area.

Relying on archival data from the RESSET and CSMAR databases over a timeframe from 2010 to 2018 of China listed company, the authors test the hypotheses by regressing common measures of crash risk on the treatment variable (REM) and crash risk control variables identified in the prior crash risk literature. The authors also introduce monitoring proxies (internal controls as an internal governance and institutional ownership as an external governance) and assess how effective internal and external governance moderate the relation between REM and stock price crash risk.

The results suggest firms with higher REM have a significantly greater stock price crash risk, and that this association is mitigated by external monitoring. That is, greater institutional ownership, particularly pressure insensitive owners, mitigates the impact of REM on stock price crash risk. However, internal control does not mitigate the association between REM and stock price crash risk.

Following the passage of the Sarbanes–Oxley (SOX) Act, prior research has documented an increase in the use of REM and a positive association between REM and cash risk. The authors demonstrate that they persist in one of the largest emerging markets where institutional regulations, market conditions and corporate behaviors are different from those in developed markets. Also, the assessment of the moderation effect of internal and external governance mechanisms could have meaningful implications for investors and regulators in Chinese and other emerging markets.

The purpose of this paper is to address the opposing views of the relationship between directors’ and officers’ liability insurance (D&O insurance) and stock price crash risk in a major Asian emerging stock market.

This paper finds an endogenous relationship between D&O insurance and stock price crash risk. Hence, the two-stage least squares regression analysis is used to address the endogeneity issue when the relationship is examined. Moreover, this paper further controls the quality of other corporate governance mechanisms to investigate whether D&O insurance still has an effect on stock price crash risk.

The effect of D&O insurance coverage is significantly negatively related to firm-specific stock price crash risk in Taiwan. More importantly, even when the quality of other corporate governance mechanisms is controlled, the negative relationship between D&O insurance coverage and firm-specific stock price crash risk remains significant. The evidence supports that D&O insurance serves as an effective external monitoring mechanism, strengthens corporate governance, and thus reduces stock price crash risk.

Emerging Asian markets suffer a dearth of research on the relationship of D&O insurance coverage and the firm-specific stock price crash risk. Investigating the relationship in Taiwan, the present study fills the research void. The findings show that D&O insurance plays an important role in reducing stock price crash risk of Taiwanese firms even when other corporate governance mechanisms are in place.

The authors provide a comprehensive empirical examination on the impact of earnings quality on stock price crash risk in China.

The authors acknowledge and distinguish two-dimensional proxies for earnings quality – accounting-based (earnings management degree) and market-based (earnings transparency) known in accounting and finance literature.

The authors find that both generally indicate that better earnings quality is associated with less crashes. However, extremely high earnings transparency interacted with insider trading profit can also actually exacerbate stock price crashes.

This study is the first to highlight the pertinence of accounting-based measures to proxy for earnings quality in a fast-growing emerging market environment such as China.

Stakeholders' uncertainty about firms' value drives their urge to get information, as well as managerial disclosure choices. In this study, the authors examine whether and how an important source of uncertainty – the recent COVID-19 pandemic's effect on corporate social responsibility (CSR) disclosure – is beyond managerial and stakeholders' control.

The authors develop a novel construct for daily CSR disclosure by employing computer-aided text analysis (CATA) on the press releases issued by 125 New Zealand Stock Exchange (NZX) listed from 28 February 2020 to 31 December 2020. To capture COVID-19 intensity, the authors use the growth rate of the population-adjusted cumulative sum of confirmed cases in New Zealand on a specific day. To examine the association between the COVID-19 outbreak and companies' CSR disclosure, the authors employed ordinary least squares (OLS) regression by clustering standard error at the firm level.

The authors find a one standard deviation increase in the COVID-19 outbreak leads to a 28% increase in such disclosures. These results remained robust to a series of sensitivity tests and continue to hold after accounting for potential endogeneity concerns. In the channel analysis, the study demonstrates that the positive relationship between COVID-19 and CSR disclosure is more pronounced in the presence of a well-structured board (i.e. a large, more independent board and with a higher proportion of women on it). In further analysis, the authors find the documented relationship varies over the pandemic's life cycle and is moderated by government stringency response, peer CSR pressure and media coverage.

This paper is the first study that contributes to the scant literature examining the impact of the COVID-19 outbreak on CSR disclosure. Prior research either investigates the relationship of the CSR-stock return during the COVID-19 market crisis or examines the relationship between corporate characteristics including the quality of financial information and the reactions of stock returns during COVID-19. The authors extend such studies by providing empirical evidence that managers respond to COVID-19 by increasing CSR disclosure.

The aim of this paper is to examine the effect of information disclosure by unlisted bond issuers on the stock price informativeness of listed firms in the same industry.

This paper takes advantage of information disclosure during the bond issuance and examines the spillover effect of unlisted bond issuers' information disclosure on listed firms in the stock market. The sample is composed of A-share firms listed on the Shanghai and Shenzhen stock exchanges from 2007 to 2018. All the data are obtained from the China Stock Market and Accounting Research and WIND databases. The impact of bond market information disclosure on price informativeness of listed firms in the same industry is identified through multivariate regression analyses.

Empirical results show that price informativeness of listed firms has a significantly positive association with the information disclosure of same-industry unlisted bond issuers. Further analyses show that the above finding is more significant when information disclosure of bond issuers is a more important channel for acquiring industry information (i.e. when industry is more concentrated, when economic uncertainty is high, and when industry information is less transparent) and understanding the industry competitive landscape (i.e. when bond issuers are relatively large, when bond issuers and listed firms have more direct product competition, when bond issuance firms are large-scale state-owned business groups), and when there are more cross-market information intermediaries (i.e. more cross-market institutional investors and more sell-side analysts). This paper indicates that information disclosure of bond issuers has a positive spillover effect on the stock market.

The novelty of the research is that the authors examine industry information spillover from unlisted firms to listed firms leveraging on unlisted firms' information disclosure in bond markets.

The authors examine the joint effect of the country-wide legal institutions and product market competition on stock crash risk in a large sample of international firms.

In the study, the authors examine whether the country-level institutional factors affect product market competition's impact on stock crash risk. Specifically, the authors characterize country-wide institutional quality with individual governance indices developed in earlier studies and also adopt the worldwide board reforms as a proxy for the change in firms' governance environment.

The authors find that strong institutions mitigate the positive relationship between product market competition and stock crash risk in the international setting. In addition, the authors find that institutional quality moderates the effect of product market competition on stock crash risk via the information channel, i.e. although firms in competitive industries manage and report earnings more aggressively, strong institutions or board reforms, curtail managers' incentive to do so.

The authors’ findings lend support to the dark side of product market competition with a broader sample from 35 countries. In light of this, when earlier studies consider firms from competitive (concentrated) industries as having less (more) severe agency problems, future studies should consider the agency costs associated with product market competition for both the US firms and non-US firms. Furthermore, when it is debatable that regulators are self-interested, captured, uninformed and thus the regulations and institutions may not be fully effective as a result, this study demonstrates the effectiveness of institutions in ex ante mitigating agency conflicts associated with product market competition.

Independent directors are important corporate decision participants and makers. Based on the Chinese cultural background, this paper interprets the listing order of independent directors as independent directors’ status, exploring their influence on the corporate research and development (R&D) behavior.

This paper studies A-share listed firms in China from 2008 to 2018 as the sample. The main method is ordinary least square (OLS) regression. We also use other methods to deal with endogenous problems, such as the firm fixed effect method, change model method, two-stage instrumental variable method, and Heckman two-stage method.

(1) Higher independent directors’ status attribute to more effective exertion of supervision and consultation function, and positively enhance the corporate R&D investment. The increase of the independent director’ status by one standard deviation will increase the R&D investment by 4.6%. (2) The above effect is more influential in firms with stronger traditional culture atmosphere, higher information opacity and higher performance volatility. (3) High-status independent directors promote R&D investment by improving the scientificity of R&D evaluation and reducing information asymmetry. (4) The enhancing effect of independent director’ status on R&D investment is positively associated with the firm’s patent output and market value.

This paper contributes to understanding the relationship between the independent directors’ status and their duty execution from an embedded cultural background perspective. The findings of the study enlighten the improvement of corporate governance efficiency and the healthy development of the capital market.