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Litigation and Stock Price Crash Risk under Securities Regulation

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  • Hu, Changyun
  • Zeng, Yanfang

Abstract

Based on the data of A-share listed companies in Shanghai and Shenzhen from 2007 to 2020, the mechanism of litigation's influence on the risk of stock price collapse is empirically examined. We find that litigation can effectively inhibit share price crash risk, and there is heterogeneity like property rights. The higher the external attention and internal governance, the stronger the governance effect of litigation; the extended analysis examines the market response to litigation under the new Securities Law, and the new regulation strengthens the response of crash risk to litigation events and has regulatory spillover effects. The conclusions of this paper are based on the institutional background of the new Securities Law, which is of great significance for deepening administrative enforcement reform and strengthening judicial supervision, improving the new securities civil litigation system and enhancing the quality of listed companies.

Suggested Citation

  • Hu, Changyun & Zeng, Yanfang, 2025. "Litigation and Stock Price Crash Risk under Securities Regulation," Finance Research Letters, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:finlet:v:84:y:2025:i:c:s1544612325009602
    DOI: 10.1016/j.frl.2025.107701
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    References listed on IDEAS

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