Does Internal Control Reduce Firms’ Stock Price Crash Risk? Evidence from China
These authors contributed equally.
- DOI
- 10.2991/assehr.k.211209.399How to use a DOI?
- Keywords
- stock price crash risk; internal control; Chinese firms; robustness checks; size of the firms; institutional ownership
- Abstract
Under a unique setting in China, the success of internal control is dependent upon whether the informational and disciplinary role it serves effectively manages risks. Using the data from the China Stock Market & Accounting Research database and Dibo databases, the relationship between internal control and stock price crash risk of the firms is investigated. Our empirical results from the regression model show that there is a negative correlation between the price crash risk and the internal control. After two robustness checks, including alternative measures and multi-fixed effects model analysis, the same results are obtained as before. Furthermore, our heterogeneity analysis shows that the effect of internal control is much more significant on small-cap firms and firms with low institutional ownership. Collectively, our findings suggest that the importance of internal control on firm governance helps reduce stock price crash risk.
- Copyright
- © 2021 The Authors. Published by Atlantis Press International B.V.
- Open Access
- This is an open access article under the CC BY-NC license.
Cite this article
TY - CONF AU - Siru A AU - Zefeng Huang AU - Junhao Wang PY - 2021 DA - 2021/12/15 TI - Does Internal Control Reduce Firms’ Stock Price Crash Risk? Evidence from China BT - Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021) PB - Atlantis Press SP - 2442 EP - 2451 SN - 2352-5428 UR - https://doi.org/10.2991/assehr.k.211209.399 DO - 10.2991/assehr.k.211209.399 ID - A2021 ER -