How Employee Salary and Benefits Affects Stock Price Crash Risk

Based on a sample of 1,675 nonfinancial listed firms in Taiwan Stock Exchange (TWSE) and Taipei Exchange (TPEx) over the period 2014 to 2023, this study examines whether employee salary and benefits are associated with stock price crash risk. With the growing emphasis on CSR and ESG, firm’s employee salary and benefits, which represents key elements of the social and governance dimensions, has increasingly been recognized as an important determinant of firm stability and market valuation. Using multiple regression analyses and alternative stock price crash risk measures, and incorporating the Taiwan High Compensation 100 Index together with firm-level salary and benefits structure variables, this study empirically investigates the relationship between salary policies and downside risk. The results indicate that firms placing greater emphasis on employee salary and benefits are less likely to experience extreme negative stock returns, and this finding remains robust across alternative model specifications and return benchmarks. The evidence suggests that well-designed salary and benefits systems enhance employee productivity and loyalty while strengthening corporate governance and information transparency, thereby stabilizing investor confidence and reducing stock price crash risk. JEL classification numbers: G14, J28.