Corporate accessibility, private communications and stock price crash risk

Research output: Book Chapters | Papers in Conference ProceedingsConference paper (refereed)Researchpeer-review

Abstract

This study examines how private communications is related stock price crash risk in emerging markets where public information environment is weak. To capture the extent and quality of private communications, we construct a corporate accessibility measure for publicly listed firms in China based on their responses to attempted communications with them (telephone, email, and on-line discussion forum), and examine whether corporate accessibility is associated with lower stock price crash risk at the firm-level. We find robust evidence that the distribution of stock returns of accessible firms is less negatively skewed and the stocks have a lower probability of extreme negative firm-specific returns. The results are more pronounced in firms with low analyst coverage, high forecast earnings dispersion, employment of non-Big 4 auditors, and greater earnings management. We also find that, relative to non-accessible firms, accessible firms’ crash risk declines less when short-selling constraints are removed, and accessible firms have lower market synchronicity. Lastly, accessible firms tend to have more corporate site visits made by market participants than is the case for non-accessible firms, and it is more likely for accessible firms that site visits reduce crash risk. Overall, our results suggest that corporate accessibility is a good measure of private communication and it complements public information sources in reducing corporate asymmetry and ultimately stock price crash risk.
Original languageEnglish
Title of host publicationProceedings of 32nd International Business Research Conference
PublisherWorld Business Institute
ISBN (Print)9781922069894
Publication statusPublished - 1 Jan 2015

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Communication
Crash
Stock prices
Accessibility
Public information
Stock returns
Asymmetry
Lower probabilities
Information environment
Synchronicity
Auditors
Earnings forecasts
Telephone
Earnings management
Short selling
Electronic mail
China
Emerging markets
Analyst coverage
Information sources

Bibliographical note

This paper was presented at the 32nd International Business Research Conference, Melbourne, Australia, 23–25 November 2015.

Cite this

FIRTH, M. A., WONG, M. L. S., & ZHAO, X. E. (2015). Corporate accessibility, private communications and stock price crash risk. In Proceedings of 32nd International Business Research Conference World Business Institute.
FIRTH, Michael Arthur ; WONG, Man Lai, Sonia ; ZHAO, Xiaofeng, Edward. / Corporate accessibility, private communications and stock price crash risk. Proceedings of 32nd International Business Research Conference. World Business Institute, 2015.
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FIRTH, MA, WONG, MLS & ZHAO, XE 2015, Corporate accessibility, private communications and stock price crash risk. in Proceedings of 32nd International Business Research Conference. World Business Institute.

Corporate accessibility, private communications and stock price crash risk. / FIRTH, Michael Arthur; WONG, Man Lai, Sonia; ZHAO, Xiaofeng, Edward.

Proceedings of 32nd International Business Research Conference. World Business Institute, 2015.

Research output: Book Chapters | Papers in Conference ProceedingsConference paper (refereed)Researchpeer-review

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FIRTH MA, WONG MLS, ZHAO XE. Corporate accessibility, private communications and stock price crash risk. In Proceedings of 32nd International Business Research Conference. World Business Institute. 2015