Large blockholders and stock price crash risk: An international study

Nicolas Eugster and Qingxia Wang

Global Finance Journal, 2023, vol. 55, issue C

Abstract: This study examines the relationship between large blockholders and stock price crash risk across 44 countries. Based on the results, firms held by large blockholders have a lower firm-specific crash risk than widely held firms. In this case, the higher the proportion of voting rights, the lower the risk. In addition, the negative association is more pronounced in firms undertaking overinvestment activities. The findings also suggest that large shareholders serve as monitors in firms, reducing agency costs and leading to lower stock price crash risk. Meanwhile, this mitigating effect is stronger in firms held by a family, another widely held corporation, and the state. Conversely, the results show no such effect in firms held by a large institutional investor. Finally, the relationship is more pronounced in developed countries and in English common law and German civil law countries, thus highlighting the role of large blockholders as a complementary governance mechanism, rather than a substitutive one.

Keywords: Stock price crash risk; Large blockholders; Ownership structure; Agency costs; Monitoring (search for similar items in EconPapers)
JEL-codes: G14 G30 G32 M40 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:55:y:2023:i:c:s1044028322001016

DOI: 10.1016/j.gfj.2022.100799

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