Information disclosure ratings and stock price crash risk

Kung-Cheng Ho (), Andreas Karathanasopoulos (), Chia Chun Lo () and Xixi Shen ()
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Kung-Cheng Ho: Guangdong University of Finance & Economics
Andreas Karathanasopoulos: Dubai Business School,University of Dubai
Chia Chun Lo: Huatai Futures Co., Ltd
Xixi Shen: Nankai Univeristy

Review of Quantitative Finance and Accounting, 2024, vol. 63, issue 4, No 6, 1323-1348

Abstract: Abstract This research examines the effects of information disclosure ratings (IDR) on firm-specific stock price crash risk. We present evidence that there is a statistically significant negative relationship between stock price crash risk and IDR. Specifically, effective information disclosure attracts greater investor attention and leads to more liquidity, which mitigates the stock price crash risk. Our findings remain robust after controlling for relevant variables and addressing the issue of endogeneity. This research proves that high IDR mitigates the stock price crash risk by eliciting market reaction, which not only introduces a novel perspective for investors in their analysis of corporate risks but also offers valuable directions for policy formulation to guide the market.

Keywords: Information disclosure ratings; Stock price crash risk; Market reactions; Investor attention; Stock liquidity (search for similar items in EconPapers)
JEL-codes: G32 G38 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11156-024-01305-0

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