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Historical business traditions and stock price crash risk: Evidence from merchant guilds’ influence in China

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  • Su, Hengyi
  • Huang, Jianbo
  • Chen, Lingyun

Abstract

This study examines whether and how merchant guilds’ historical traditions affect the stock price crash risk of Chinese firms. Using a comprehensive sample of publicly traded companies in China from 2003 to 2019, we find that firms more affected by historical guild traditions have significantly higher crash risk. Mechanism tests show that these firms engage in relation-oriented financial activities—including transactions, guarantees, and loans with their related parties—which is coupled with less voluntary disclosure to external investors. Furthermore, the effect of historical guild tradition on crash risk is especially pronounced for companies with lower analyst coverage, lower institutional ownership, and those in regions with weaker local governance. Overall, this study illustrates that exclusive institutions such as merchant guilds can encourage relation-oriented behaviors and ultimately amplify stock price crash risk.

Suggested Citation

  • Su, Hengyi & Huang, Jianbo & Chen, Lingyun, 2025. "Historical business traditions and stock price crash risk: Evidence from merchant guilds’ influence in China," Journal of Behavioral and Experimental Finance, Elsevier, vol. 48(C).
    • Handle: RePEc:eee:beexfi:v:48:y:2025:i:c:s2214635025001017
    DOI: 10.1016/j.jbef.2025.101120
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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