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The Driving Factors of Stock Price Crash Risk

In: Proceedings of the 3rd International Conference on Economic Development and Business Culture (ICEDBC 2023)

Author

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  • Shuhua Zhang

    (University of Glasgow, Adam Smith Business School)

Abstract

Factors that increase the likelihood of a stock market collapse are examined in this study via a review of the empirical literature. We focus on the main drivers relating to the potential for a decline in stock prices, including market factors, variables that are unique to the company, and those that are industry- and country-wide factors. Our findings suggest that there is a multi-faceted phenomenon linked to the potential fall of stock prices. The likelihood of a stock price fall is heavily influenced by market parameters including liquidity, market capitalization, and volatility. Similarly, firm-specific factors, such as leverage, leverage ratio, and firm size, have a significant impact on stock price crash risk. Finally, macroeconomic factors, such as GDP growth, inflation rate, and exchange rate, are also found to be important factors that might cause a stock market meltdown. In conclusion, the danger of a fall in stock prices is influenced by a wide range of circumstances and is itself a complicated and multi-faceted phenomenon.

Suggested Citation

  • Shuhua Zhang, 2024. "The Driving Factors of Stock Price Crash Risk," Advances in Economics, Business and Management Research, in: Shehnaz Tehseen & Mohd Naseem Niaz Ahmad & Rafia Afroz (ed.), Proceedings of the 3rd International Conference on Economic Development and Business Culture (ICEDBC 2023), pages 718-723, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-246-0_86
    DOI: 10.2991/978-94-6463-246-0_86
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