Can Internal Control Information Disclosure Reduce Stock Price Crash Risk?
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| Title | Can Internal Control Information Disclosure Reduce Stock Price Crash Risk?
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| Author | Ye Kangtao, Cao Feng, Wang Huangcheng |
| Organization | Business School of Renmin University of China |
| Email | yekangtao@rbs.org.cn,caofeng0730@163.com,wanghuacheng@rbs.org.cn |
| Key Words | Stock Price Crash Risk；Disclosure of Internal Control Information；Information Asymmetry |
| Abstract | Stock price crash severely harms investors’ interests, and hampers the development of capital markets. Hence an emerging literature in finance has focused on the determinants of stock price crash risk. Using a sample of Chinese listed firms in 2011 we investigate whether or not the disclosure of a firm’s internal control system can reduce the future crash risk of its stock price. We find that stock price crash risk is significantly and negatively associated with the disclosure of firms’ internal control system. Our findings are robust to a battery of sensitivity tests including the endogeneity issue. Further analyses reveal that the negative relationship between stock price crash risk and internal control system disclosure is more pronounced for firms with greater information asymmetry and with worse financial performance. Our findings suggest that the disclosure of internal control system can help the sustainable development of Chinese stock markets. |
| Serial Number | WP621 |
| Time | 2014-08-05 |
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