City Reputation and Stock Price Crash Risk: Evidence from China’s National Civilized City Award

Yuyang Zhao, Wenwu Cai and Cheng Xiang

Emerging Markets Finance and Trade, 2023, vol. 59, issue 11, 3636-3655

Abstract: As a top honor for the overall civilization of cities in mainland China, the National Civilized City (NCC) award reflects good city reputation of the award-winners. This study investigates whether and how NCC awards affect stock price crash risk. Using a staggered difference-in-differences model, we find that the NCC award significantly reduces local firms’ future crash risk. This effect is more pronounced among firms with a better corporate reputation, inferior internal governance, and weaker external monitoring. Mechanism tests show that the NCC award reduces crash risk by mitigating management opportunism and alleviating information opacity.

Date: 2023
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DOI: 10.1080/1540496X.2023.2228460

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