The Impact of Corruption Investigations on Stock Price Crash Risk: Evidence from the Crackdown on “Tigers” in China

Chao Yang, Qizhi Tao*, Jiangze Du, Stephen X. Gong

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)4261-4271
Number of pages11
JournalEmerging Markets Finance and Trade
Volume57
Issue number15
DOIs
Publication statusPublished - 2021

Keywords

  • Corruption investigations
  • information disclosure
  • stock price crash risk

Fingerprint

Dive into the research topics of 'The Impact of Corruption Investigations on Stock Price Crash Risk: Evidence from the Crackdown on “Tigers” in China'. Together they form a unique fingerprint.

Cite this