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Minority shareholders' activism and stock price crash risk: Evidence from China

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  • Wang, Qiong
  • Qiu, Muqing

Abstract

This study investigates the effect of minority shareholders' activism on stock price crash risk in the Chinese stock market. Using a novel dataset on minority shareholders' attendance at annual general meetings (AGMs), we find that minority shareholders' attendance, especially the onsite attendance, significantly exacerbates firms' future crash risk. The results are robust to instrumental variable approach, placebo tests, and alternative measures of minority shareholders' attendance and crash risk. We also find three channels: incremental analyst following, media coverage and retail attention, all of which expand market pressure and exacerbate managers' incentives to withhold bad news. Extended analyses show that the impact of minority shareholders' attendance is less pronounced among firms with better investor protection. Overall, our findings are helpful to understand the importance of minority shareholders' activism and its unintended consequences on stock market in the emerging economies.

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  • Wang, Qiong & Qiu, Muqing, 2023. "Minority shareholders' activism and stock price crash risk: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 87(C).
    • Handle: RePEc:eee:finana:v:87:y:2023:i:c:s1057521923001102
    DOI: 10.1016/j.irfa.2023.102594
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    2. Feng, Yumei & Pan, Yuying & Ho, Kung-Cheng & Liu, Guanchun, 2023. "Corporate governance of weak stakeholders: Minority investors and investment efficiency," Emerging Markets Review, Elsevier, vol. 56(C).

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