Internal whistleblowing and stock price crash risk

Xiaowei Lin, Zijun Ding, Aihua Chen and Huaizhi Shi

International Review of Financial Analysis, 2022, vol. 84, issue C

Abstract: We investigate the impact of internal whistleblowing on stock price crash risk in China. We expect that internal whistleblowing plays a crucial role in preventing firms from misconducting, which would result in a lower stock price crash risk. Consistent with this conjecture, the empirical evidence negatively correlates internal whistleblowing and stock price crash risk. Our results remain robust when adopting the instrumental variable, propensity matching method, and Heckman's two-stage model. Path analysis shows that internal whistleblowing lowers the crash risk by reducing firms' accounting violations and executives' frauds. The effect is more pronounced in firms with a positive organizational environment and non-state-owned firms. Overall, the study contributes to the emerging literature on the governance role of whistleblowing.

Keywords: Whistleblowing; Internal whistleblowing; Corporate governance; Corporate culture; Stock crash risk (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:84:y:2022:i:c:s1057521922003283

DOI: 10.1016/j.irfa.2022.102378

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