Confucianism and stock price crash risk: Evidence from China

Khalil Jebran, Shihua Chen, Yan Ye and Chengqi Wang

The North American Journal of Economics and Finance, 2019, vol. 50, issue C

Abstract: In this study, we conjecture that Confucianism can curb the managerial bad news suppression behavior and consequently stock price crash risk. Using a unique sample of geographical-proximity-based Confucianism variables and Chinese nonfinancial firms over the period 2004–2014, we show that Confucianism is negatively associated with stock price crash risk. Further, we document that analyst coverage and institutional ownership, as formal governance mechanisms, attenuate the effect of Confucianism on stock price crash risk. The results are consistent to a battery of robustness tests and additional analyses. Overall the findings suggest that Confucianism, as an ethical system, mitigates crash risk in Chinese firms.

Keywords: Confucianism; Stock price crash risk; Analyst coverage; Institutional ownership; China (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:50:y:2019:i:c:s1062940818304315

DOI: 10.1016/j.najef.2019.100995

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