Stock price crash risk and leverage dynamics: Evidence from the GCC countries

Ramzi Benkraiem, Hamdi Ben-Nasr, Salem Nechi () and Hatem Rjiba

Finance Research Letters, 2023, vol. 54, issue C

Abstract: This paper examines the impact of stock price crash risk on capital structure dynamics using a sample of firms located in the GCC region. The results show that a higher exposure to stock price crash risk is associated with a lower speed of leverage adjustments toward target. We also find that this relation is more pronounced for over-levered firms compared to their under-levered peers. Our results withstand several sensitivity tests including, using alternative proxies for main dependent and independent variables, and ruling out endogeneity concerns, among other.

Keywords: Stock price crash risk; Information asymmetry; Speed of leverage adjustment (search for similar items in EconPapers)
JEL-codes: G14 G32 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323000624

DOI: 10.1016/j.frl.2023.103688

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