Do Regional Investment Preferences Affect Corporate Stock Price Crash Risk? Evidence from Chinese Listed Companies

Junkai Wang, Baolei Qi, Muhammad Istiaque Hossain, Haipeng Geng and Jameel Hussain Muhammad

CESifo Economic Studies, 2024, vol. 70, issue 1, 51-68

Abstract: This article investigates the influence of regional investment preferences on corporate stock price crash risk. Using a sample of Chinese listed companies from 2006 to 2020, we find that companies located in regions with stronger investment preferences experience a lower risk of stock price crash. The analysis shows that regional investment preferences can reduce companies’ excessive investment behavior and speculative accounting practices, eventually reducing the stock price crash risk. Subsequent research reveals that stringent internal controls and external supervision can mitigate the impact of regional investment preferences on the likelihood of a company experiencing a stock price crash.

Keywords: investment preferences; stock price crash; excessive investment; earning management (search for similar items in EconPapers)
JEL-codes: G34 M14 O16 (search for similar items in EconPapers)
Date: 2024
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