Ultimate government control and stock price crash risk: Evidence from China

Lingxia Sun

Emerging Markets Review, 2023, vol. 55, issue C

Abstract: Using data of Chinese firms over 2004–2018, we find that firms controlled by government entities, particularly central government entities, are less prone to stock price crashes, as compared with privately controlled firms. The effect is robust to alternative estimation approaches and moderated by the Split-share Structure Reform and the anti-corruption campaign. The results attest to the incentive alignment view that controlling and minority shareholders align their interests and stock prices perform well. Further, we find that government-controlled firms exhibit less financial opacity, undertake less risky investments, and appoint myopic CEOs, through which stock price crash risk is diminished.

Keywords: Ultimate government control; Stock price crash risk; Entrenchment effect; Incentive alignment effect; Financial opacity; CEO myopia (search for similar items in EconPapers)
JEL-codes: G10 G23 G32 G34 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:55:y:2023:i:c:s1566014122000875

DOI: 10.1016/j.ememar.2022.100970

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