The Effect of Human Capital on Stock Price Crash Risk

Yi Si () and Chongwu Xia ()
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Yi Si: Xi’an Jiaotong University
Chongwu Xia: University of Science and Technology of China

Journal of Business Ethics, 2023, vol. 187, issue 3, No 9, 589-609

Abstract: Abstract This paper studies how the human capital embedded in rank-and-file employees affects firms’ stock price crash risk. Employing a unique setting in China where we measure human capital using employee information at the firm level, we show that human capital quality improves firms’ internal information environments, curbs bad-news hoarding and overinvestment, leading to lower stock price crash risk. The findings are robust to instrumental variable regressions. Our study highlights the internal informational role of human capital and sheds light on its implications for capital markets and outside investors. Therefore, we contribute to the literature on the interaction between non-shareholding stakeholders and shareholders.

Keywords: Internal information quality; Human capital quality; Crash risk; Bad-news hoarding (search for similar items in EconPapers)
JEL-codes: G12 G14 G32 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10551-022-05134-w

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