An Empirical Investigation of Multinationality and Stock Price Crash Risk for MNCs in China

Larry Su (), Elmina Homapour (), Fabio Caraffini () and Francisco Chiclana
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Larry Su: School of Business, Universiti Teknologi Brunei, Seri Begawan BE1410, Brunei
Elmina Homapour: Nottingham Business School, Nottingham Trent University, Nottingham NG1 4FQ, UK
Fabio Caraffini: Computational Foundry, Swansea University, Swansea SA1 8EN, UK
Francisco Chiclana: Institute of Artificial Intelligence, School of Computer Science and Informatics, De Montfort University, Leicester LE1 9BH, UK

Mathematics, 2022, vol. 10, issue 19, 1-12

Abstract: There is a large volume of literature in international business on multinationality. There is an equally large volume of literature in finance on stock price crash risk. However, very few studies have attempted to provide a link between these two research areas. Using an unbalanced panel data consisting of 473 multinational corporations (MNCs) publicly listed in the Chinese stock markets during 2004 to 2020, this paper is one of the first to empirically investigate whether and to what extent multinationality affects stock price crash risk. The paper finds strong evidence that multinational operation is negatively related to stock price crash risk. In addition, MNCs with better corporate governance quality experience larger decline in stock price crash risk when the degree of multinationality increases. Furthermore, MNCs with higher stock market liquidity experience lower crash risk. An important implication is that companies should strengthen their corporate governance and market liquidity while “going global”.

Keywords: multinational corporations (MNCs); stock price crash risk; multinationality; Chinese stock markets (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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