Equity Market Competition and Stock Price Crash Risk

48 Pages Posted: 18 Sep 2015 Last revised: 5 Oct 2017

See all articles by Patrick Vorst

Patrick Vorst

Maastricht University School of Business and Economics

Date Written: September 30, 2017

Abstract

This study investigates the impact of equity market competition on stock price crash risk. Higher levels of equity market competition lead to a faster incorporation of information into stock prices, so that the amount of information that is at any time impounded into prices is greater. I find that equity market competition reduces the effectiveness of bad news hiding and is associated with a reduced likelihood of crashes. Additional tests show that the importance of equity market competition is concentrated in firms with higher levels of information asymmetry and during high-sentiment periods and provide further support for this hypothesis.

Suggested Citation

Vorst, Patrick, Equity Market Competition and Stock Price Crash Risk (September 30, 2017). Available at SSRN: https://ssrn.com/abstract=2661580 or http://dx.doi.org/10.2139/ssrn.2661580

Patrick Vorst (Contact Author)

Maastricht University School of Business and Economics ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

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