Controlling shareholder’s escape threat: Foreign residency rights and stock price crash risk

Feng Cao, Haitong Li, Xueyan Zhang and Zixi Zhang

Research in International Business and Finance, 2025, vol. 74, issue C

Abstract: This paper examines how foreign residency rights (FRRs) of controlling shareholders affect stock price crash risk in emerging financial markets. Using a unique sample of Chinese privately-owned firms, we find that FRRs significantly increase crash risk. This effect is stronger for firms that are less conservative in accounting, more fraudulent, and more litigious. Furthermore, we find that the FRRs-crash risk effect is more pronounced when controlling shareholders face original sin suspicion, obtain FRRs directly or indirectly control the listed firm. We also identify several mitigating factors, and our findings suggest that more independent directors, stronger audit supervision, and better legal system can reduce the positive effect of FRRs on crash risk.

Keywords: Foreign residency rights; Stock price crash risk; Controlling shareholder; Financial risk (search for similar items in EconPapers)
JEL-codes: G30 M10 M20 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0275531924005002
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:74:y:2025:i:c:s0275531924005002

DOI: 10.1016/j.ribaf.2024.102707

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

More articles in Research in International Business and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().