Institutional blockholder monitoring and stock price crash risk

Chune Young Chung, Pham Thi Ngoc Dung and Chang Liu

The Quarterly Review of Economics and Finance, 2024, vol. 98, issue C

Abstract: We examine whether institutional investors can reduce the risk of stock price crashes caused by managers’ intentional withholding of bad news. Specifically, we focus on the effect of institutional blockholder monitoring on stock price crash risk. The empirical results show negative relationships between institutional blockholdings and various crash risk variables, which suggests that institutional blockholder monitoring of nontransparent managerial behaviors can decrease crash risk. Furthermore, we find that the influence of monitors is more pronounced in firms with high information asymmetry, thereby corroborating the institutional blockholder monitoring role. This study validates the monitoring role of dedicated institutional investors in agency-motivated managerial behaviors.

Keywords: Institutional blockholder; Stock price crash risk; Information uncertainty; Managerial behavior (search for similar items in EconPapers)
JEL-codes: G32 J28 J61 K32 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:98:y:2024:i:c:s106297692400139x

DOI: 10.1016/j.qref.2024.101933

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