Review of the Empirical Literature on Stock Crash Risk: The Role of Managers’ Characteristic, Information Environment and Its Micro-Consequences

DOI

10.2991/978-94-6463-246-0_45How to use a DOI?

Keywords

economic crisis; Public panic; stock market crash

Abstract

An unexpected, sharp decline in stock prices over a short period of time is known as a stock crash. A significant catastrophic incident or the economic crisis may have a side effect that causes stocks to collapse. This can also be due to widespread public anxiety about a stock fall, which leads to panic selling and additional market declines. The negative skewness of the firm-specific weekly returns is how we estimate crash risk using a large sample of publicly listed companies from 2009 to 2019. The study examined how various firm characteristics, mechanisms for corporate governance, and macroeconomic factors affect crash risk and how crash risk affects future stock returns, earnings quality, and corporate policies. The main findings include: (1) Companies have a higher crash risk due to higher leverage, lower profitability, lower growth opportunities, more intangible assets, more earnings management, more information asymmetry, weaker shareholder rights, and lower institutional ownership. (2) Crash risk is negatively correlated with company value and positively correlated with cost of capital. (3) Crash risk predicts lower future stock returns and operating performance. The consequences of a stock market crash are a topic of great interest among economists, policymakers, investors, and the general public. A stock market crash is characterized by a sudden and significant decline in the value of stocks, often leading to a wide range of economic and financial repercussions. Therefore, we will review the empirical literature on the reasons which caused the stock risk crash and the consequences of stock market crashes, focusing on their impacts on various changes with companies, such as the personal changes within the company and the financial varies within the company.

Copyright

© 2024 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Download article (PDF)

TY  - CONF
AU  - Pintong Wang
AU  - Rui Chen
PY  - 2023
DA  - 2023/09/26
TI  - Review of the Empirical Literature on Stock Crash Risk: The Role of Managers’ Characteristic, Information Environment and Its Micro-Consequences
BT  - Proceedings of the 3rd International Conference on Economic Development and Business Culture (ICEDBC 2023)
PB  - Atlantis Press
SP  - 374
EP  - 381
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-246-0_45
DO  - 10.2991/978-94-6463-246-0_45
ID  - Wang2023
ER  -