EconPapers    
Economics at your fingertips  
 

Does crackdown on corruption reduce stock price crash risk? Evidence from China

Yunsen Chen, Yuan Xie, Hong You and Yanan Zhang
Authors registered in the RePEc Author Service: Yunsen Chen and Yunsen Chen

Journal of Corporate Finance, 2018, vol. 51, issue C, 125-141

Abstract: This study examines whether crackdown on political corruption in China affects future stock price crashes. Using data from corruption-related prosecutions, we find that firms under prosecuted official jurisdictions experience a significant decrease in crash risk after the crackdown. Cross-sectional tests show that results are more pronounced for firms with higher political dependence on governments and for firms with worse information environment. Moreover, channel tests provide direct evidence that crackdown decreases crash risk by reducing political risk and bad news hoarding. Overall, our study offers novel evidence on how crackdown on corruption benefits firms.

Keywords: Corruption; Crackdown; Crash risk; Political risk; Bad news hoarding (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119917307253
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:51:y:2018:i:c:p:125-141

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-04-01
Handle: RePEc:eee:corfin:v:51:y:2018:i:c:p:125-141