Large blockholders and stock price crash risk: An international study

Article


Eugster, Nicolas and Wang, Qingxia (Jenny). 2023. "Large blockholders and stock price crash risk: An international study." Global Finance Journal. 55. https://doi.org/10.1016/j.gfj.2022.100799
Article Title

Large blockholders and stock price crash risk: An international study

ERA Journal ID18372
Article CategoryArticle
AuthorsEugster, Nicolas and Wang, Qingxia (Jenny)
Journal TitleGlobal Finance Journal
Journal Citation55
Article Number100799
Number of Pages25
Year2023
PublisherElsevier
Place of PublicationNetherlands
ISSN1044-0283
1873-5665
Digital Object Identifier (DOI)https://doi.org/10.1016/j.gfj.2022.100799
Web Address (URL)https://www.sciencedirect.com/science/article/pii/S1044028322001016
AbstractThis study examines the relationship between large blockholders and stock price crash risk across 44 countries. Based on the results, firms held by large blockholders have a lower firm-specific crash risk than widely held firms. In this case, the higher the proportion of voting rights, the lower the risk. In addition, the negative association is more pronounced in firms undertaking overinvestment activities. The findings also suggest that large shareholders serve as monitors in firms, reducing agency costs and leading to lower stock price crash risk. Meanwhile, this mitigating effect is stronger in firms held by a family, another widely held corporation, and the state. Conversely, the results show no such effect in firms held by a large institutional investor. Finally, the relationship is more pronounced in developed countries and in English common law and German civil law countries, thus highlighting the role of large blockholders as a complementary governance mechanism, rather than a substitutive one.
KeywordsAgency costs; Stock price crash risk ; Large blockholders ; Ownership structure ; Ownership structure
ANZSRC Field of Research 2020350202. Finance
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Byline AffiliationsUniversity of Queensland
Centre for Applied Climate Sciences
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