Insider ownership and stock price crash risk around the globe

Gang Hu, Yiye Liu, Jacqueline Wenjie Wang, Gaoguang Zhou and Xindong Zhu

Pacific-Basin Finance Journal, 2022, vol. 72, issue C

Abstract: Insider ownership is one of the most important aspects of corporate governance. In this study, we examine how insider ownership affects firms' stock market downside risk, as measured by stock price crash risk, globally. We use a large-scale international sample consisting of observations from 40 countries, and find an inverted U-shaped relationship between insider ownership and stock price crash risk. These results remain unchanged by extensive robustness tests using various settings and specifications. We also identify some factors that moderate the relationship between insider ownership and stock price crash risk: the degree of ownership dispersion at the country level, and country-level investor protection regimes / information environment / financial system structure (bank- or market-based).

Keywords: Insider ownership; Investor protection; Stock Price crash risk (search for similar items in EconPapers)
JEL-codes: G15 G32 G34 M41 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:72:y:2022:i:c:s0927538x22000099

DOI: 10.1016/j.pacfin.2022.101714

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