Corporate Board Reforms Around the World and Stock Price Crash Risk

54 Pages Posted: 23 Feb 2020

See all articles by Jinshuai Hu

Jinshuai Hu

Xiamen University - Institute for Financial and Accounting Studies

Siqi Li

Santa Clara University - Leavey School of Business

Alvaro G. Taboada

Mississippi State University

Feida Zhang

University of Queensland - Accounting and Accountability

Date Written: January 27, 2020

Abstract

We examine the impact of corporate board reforms around the world on stock price crash risk. Using a sample of firms in 41 economies that passed major board reforms between 1990 and 2012, we find that board reforms are associated with a significant reduction in crash risk of about 13%. The effect of reforms on crash risk is stronger among firms with more severe ex ante agency problems. Our analysis further suggests that board reforms reduce crash risk by improving financial transparency and enhancing investment efficiency. In sum, our findings are consistent with the notion that board reforms improve board oversight and mitigate agency problems.

Keywords: Board reforms; corporate governance; stock price crash risk

JEL Classification: G30; G38; F30

Suggested Citation

Hu, Jinshuai and Li, Siqi and Taboada, Alvaro G. and Zhang, Feida, Corporate Board Reforms Around the World and Stock Price Crash Risk (January 27, 2020). Journal of Corporate Finance, Vol. 62, 2020, Available at SSRN: https://ssrn.com/abstract=3526384

Jinshuai Hu

Xiamen University - Institute for Financial and Accounting Studies ( email )

Xiamen, Fujian 361005
China

Siqi Li

Santa Clara University - Leavey School of Business ( email )

500 El Camino Real
Santa Clara, CA 95053
United States

Alvaro G. Taboada (Contact Author)

Mississippi State University ( email )

310-H McCool Hall
PO Box 9580
Mississippi State, MS 39762
United States
662-325-6716 (Phone)
662-325-1977 (Fax)

Feida Zhang

University of Queensland - Accounting and Accountability ( email )

St Lucia
Brisbane, Queensland 4072
Australia

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