Long-term investor value appropriation and stock price crash risk

This study investigates how shareholder investment horizons influence the likelihood of sudden stock price collapses by focusing on investors’ preferences for long-term orientation. Drawing on principal-agent theory, information asymmetry theory, and bad news hoarding theory, we argue that long-term shareholders strengthen managerial monitoring, constrain managers’ concealment of adverse information, and reduce the accumulation of hidden bad news that ultimately triggers sudden price collapses. The evidence indicates that companies with shareholders who prioritize long-term objectives face lower crash risk. Mediation analyses further reveal that long-term shareholder orientation reduces crash risk by curbing earnings management, improving disclosure quality, reducing analyst forecast bias, and limiting bad news hoarding. Furthermore, this negative correlation becomes stronger in firms with robust financial resources, effective labor unions, and less entrenched management structures. Higher information transparency, stronger corporate governance, greater analyst coverage, and higher audit quality further amplify the effect. These findings underscore the critical role of long-term shareholder orientation in fostering corporate decisions that mitigate agency issues and strengthen risk management practices.