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Insider ownership and stock price crash risk around the globe

Author

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  • Hu, Gang
  • Liu, Yiye
  • Wang, Jacqueline Wenjie
  • Zhou, Gaoguang
  • Zhu, Xindong

Abstract

Insider ownership is one of the most important aspects of corporate governance. In this study, we examine how insider ownership affects firms' stock market downside risk, as measured by stock price crash risk, globally. We use a large-scale international sample consisting of observations from 40 countries, and find an inverted U-shaped relationship between insider ownership and stock price crash risk. These results remain unchanged by extensive robustness tests using various settings and specifications. We also identify some factors that moderate the relationship between insider ownership and stock price crash risk: the degree of ownership dispersion at the country level, and country-level investor protection regimes / information environment / financial system structure (bank- or market-based).

Suggested Citation

  • Hu, Gang & Liu, Yiye & Wang, Jacqueline Wenjie & Zhou, Gaoguang & Zhu, Xindong, 2022. "Insider ownership and stock price crash risk around the globe," Pacific-Basin Finance Journal, Elsevier, vol. 72(C).
  • Handle: RePEc:eee:pacfin:v:72:y:2022:i:c:s0927538x22000099
    DOI: 10.1016/j.pacfin.2022.101714
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    More about this item

    Keywords

    Insider ownership; Investor protection; Stock Price crash risk;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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