Mandatory Information Disclosure and Stock Price Crash Risk: Evidence from Private Firm-Visits in China

Abstract

This paper studies the effect of mandatory information disclosure on stock price crash risk using data on listed firms’ private in-house meetings in the Chinese stock market. Utilizing the regulation implemented by the Shenzhen Stock Exchange in 2012, we use a difference-in-difference approach and find that the treated group exhibits significantly lower crash risk comparing to the control group listed on the Shanghai Stock Exchange, following the regulation. This finding suggests that improving transparency may reduce crash risk, and have implications to both academic and policymakers.

Keywords: mandatory information disclosure, stock price crash risk, difference-in-difference

JEL Classification: D82, G14, G18