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Large shareholders’ tunneling and stock price crash risk

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  • Shangkun Liang
  • Yanfeng Jiang
  • Junli Yu
  • Wei Xu

Abstract

Tunnelling by large shareholders is a problem representative of ownership concentration. Large shareholders may interfere with a firm’s information disclosure to support their tunnelling behaviour, causing a high stock price crash risk. Using listed companies in China from 2001 to 2019 as a sample, we find that more severe tunnelling can lead to a higher risk of stock price crashes. Moreover, we investigate potential factors such as internal control, operational performance, and split-share reforms, that may affect the aforementioned relationship. A high level of internal control and good operational performance will weaken the relationship, and the relationship is stronger before split-share reforms. The findings of this study contribute to a better understanding of the relationship given China’s institutional background and better investor protection.

Suggested Citation

  • Shangkun Liang & Yanfeng Jiang & Junli Yu & Wei Xu, 2021. "Large shareholders’ tunneling and stock price crash risk," China Journal of Accounting Studies, Taylor & Francis Journals, vol. 9(4), pages 469-489, October.
    • Handle: RePEc:taf:rcjaxx:v:9:y:2021:i:4:p:469-489
    DOI: 10.1080/21697213.2022.2082717
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    Cited by:

    1. Su, Shiwei & Jia, Songbo & Shi, Guangping, 2023. "Leverage adjustment behaviors and stock price crash risk," Finance Research Letters, Elsevier, vol. 56(C).

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