Abstract
This study examines the effect of stock price crash on the information environment. We further investigate the effect of female and financial expert CEOs on the stock price crash and information environment nexus. Employing one of the largest datasets to-date of Chinese A-share listed firms (i.e., over 35,000 firm-year observations), our findings are twofold. First, consistent with agency and information asymmetry perspective, we find that stock price crash deteriorates the quality of information environment. Second, consistent with resource dependence view, our findings reveal that the presence of female and financial expert CEOs mitigate the stock price crash and information environment relationship. Our findings are robust to different endogeneity tests (e.g., two-stage least squares, propensity score matching, bootstrapping, and the system generalized method of moments), alternate proxies and additional analyses. This study contributes to the literature on portfolio investment and risk management.
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Data availability
The findings of this study are based on the data extracted from Chinese Securities Market and Accounting Research (CSMAR) database.
Notes
Jiang and Kim (2020) also highlighted this agenda in their recent paper and argued that controlling shareholders’ exploitation of minority shareholders is the main reason for governance irregularities in Chinese firms.
For instance, Chinese stock market crashed severely in July 2015 after having large positive returns over the time and government had to intervene to rescue the firms.
The data of financial expert CEOs is not available for pre financial crisis period; therefore, we report interaction results of financial expert CEOs for post crisis period only.
However, in the context of China, the number of institutional investors is still increasing at a steady pace (Jiang & Kim 2020).
Note that 3.09 is approximately the 0.1 percentile of a standard normal distribution (Hutton et al. 2009).
However, the number of observations is 18,230 in all regressions involving CEO financial expertise due to the non-availability of data on CSMAR for pre-crisis period (i.e., before 2008).
We are unable to test the impact of interaction term between financial expert CEOs and stock price crash (CEO_FIN x CRASH) on the quality of information environment in pre-crisis period due to the non-availability of CEO financial expertise (CEO_FIN) data on CSMAR for pre-crisis period.
The findings of 2SLS analysis have already been reported in Table 3. Here, we will focus on rest of the techniques to tackle the issue of potential endogeneity.
The results of first stage probit model of PSM are not reported to save some space but available upon request.
The results of first stage Probit model of bootstrapping approach are not reported to save some space but available upon request.
On average, 4.1% and 7.1% of the Chinese firms appoint a female and financial expert CEO, respectively. Please see the summary statistics in Table 2.
These results are not tabulated for the sake of brevity, but available upon request.
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Gull, A.A., Abid, A., Nguyen, D.K. et al. Stock price crash and information environment: Do CEO gender and financial expertise matter?. Rev Quant Finan Acc (2024). https://doi.org/10.1007/s11156-024-01244-w
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DOI: https://doi.org/10.1007/s11156-024-01244-w