TY - JOUR
T1 - The Impact of Corruption Investigations on Stock Price Crash Risk
T2 - Evidence from the Crackdown on “Tigers” in China
AU - Yang, Chao
AU - Tao, Qizhi
AU - Du, Jiangze
AU - Gong, Stephen X.
N1 - Publisher Copyright:
© 2020 Taylor & Francis Group, LLC.
PY - 2021
Y1 - 2021
N2 - Using data on corrupt senior officials in China, we find that corruption investigations significantly increase the stock price crash risk for listed firms located in the provinces where the senior officials formerly worked, and the impact is positively related to the officials’ political level. Channel tests find that corruption investigations increase negative news, which results in an increase in crash risk. Additional tests document that state-owned enterprises and politically connected firms experience lower crash risk, and the impact is more significant in more-developed provinces. In addition, we find that firms directly associated with investigated officials experience negative cumulative abnormal returns.
AB - Using data on corrupt senior officials in China, we find that corruption investigations significantly increase the stock price crash risk for listed firms located in the provinces where the senior officials formerly worked, and the impact is positively related to the officials’ political level. Channel tests find that corruption investigations increase negative news, which results in an increase in crash risk. Additional tests document that state-owned enterprises and politically connected firms experience lower crash risk, and the impact is more significant in more-developed provinces. In addition, we find that firms directly associated with investigated officials experience negative cumulative abnormal returns.
KW - Corruption investigations
KW - information disclosure
KW - stock price crash risk
UR - http://www.scopus.com/inward/record.url?scp=85101842333&partnerID=8YFLogxK
U2 - 10.1080/1540496X.2020.1859367
DO - 10.1080/1540496X.2020.1859367
M3 - Article
AN - SCOPUS:85101842333
SN - 1540-496X
VL - 57
SP - 4261
EP - 4271
JO - Emerging Markets Finance and Trade
JF - Emerging Markets Finance and Trade
IS - 15
ER -