Corporate Governance and Firm‐Specific Stock Price Crashes

41 Pages Posted: 22 Nov 2016

See all articles by Panayiotis C. Andreou

Panayiotis C. Andreou

Cyprus University of Technology

Constantinos Antoniou

University of Warwick - Warwick Business School

Joanne Horton

University of Exeter

Christodoulos Louca

Cyprus University of Technology

Multiple version iconThere are 2 versions of this paper

Date Written: November 2016

Abstract

We investigate whether ownership structure, accounting opacity, board structure & processes and managerial incentives attributes relate to future stock price crash risk. Principal component analysis on the 21 attributes that comprise these four corporate governance dimensions reveals that they can explain between 13.1% and 23.0% of a one standard deviation in crash risk. Transient institutional ownership, CEO stock option incentives and the proportion of directors that hold equity increase crash risk, whilst insiders' ownership, accounting conservatism, board size and the presence of a corporate governance policy mitigate crash risk. Overall these relationships are more pronounced in environments that accentuate agency risk.

Keywords: crash risk, corporate governance, agency risk, information environment

Suggested Citation

Andreou, Panayiotis C. and Antoniou, Constantinos and Horton, Joanne and Louca, Christodoulos, Corporate Governance and Firm‐Specific Stock Price Crashes (November 2016). European Financial Management, Vol. 22, Issue 5, pp. 916-956, 2016. Available at SSRN: https://ssrn.com/abstract=2873972 or http://dx.doi.org/10.1111/eufm.12084

Panayiotis C. Andreou (Contact Author)

Cyprus University of Technology ( email )

School Of Management and Economics
P.O. Box 50329
Lemesos, 3036
Cyprus

HOME PAGE: http://www.pandreou.com

Constantinos Antoniou

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

Joanne Horton

University of Exeter ( email )

Northcote House
The Queen's Drive
Exeter, Devon EX4 4QJ
United Kingdom

Christodoulos Louca

Cyprus University of Technology ( email )

Limassol, 3603
Cyprus

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