Minority shareholders' activism and stock price crash risk: Evidence from China |
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| Affiliation: | 1. School of Economics and Management, Southeast University, Nanjing, China;2. Business School, East China University of Science and Technology, Shanghai, China;1. Audencia Business School, Research Center: Markets Technology and Society, 8 Route de la Joneliere, 44312 Cedex 3, Nantes, France;2. Heriot Watt University, Accounting, Economics and Finance SEEC, CFI, Edinburgh, Scotland EH14 4AS, UK;1. School of Business, Pusan National University, Busan 46241, Republic of Korea;2. College of Social Science, Hansung University, Seoul 02876, Republic of Korea;3. College of Business Administration, University of Seoul, Seoul 02504, Republic of Korea;1. Department of Accounting and Finance, United Arab Emirates University, Al Ain, United Arab Emirates;2. Department of Finance and Investment, College of Economics and Administrative Sciences, Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh, Saudi Arabia;3. University of Sfax, Higher Institute of Business Administration, Tunisia;4. Department of Management and Engineering, Linköping University, 581 83 Linköping, Sweden;5. Business School, Hunan University, Changsha 410082, PR China;1. School of Economics and Trade, Hunan University of Technology and Business, Changsha, China;2. School of Economics and Business Administration, Chongqing University, Chongqing, China;3. Business School, Central South University, Changsha, China;1. School of Public Administration, Nanjing university of Finance and Economics, China;2. Department of History of Science, Technology and Medicine, Peking University, China |
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| Abstract: | This study investigates the effect of minority shareholders' activism on stock price crash risk in the Chinese stock market. Using a novel dataset on minority shareholders' attendance at annual general meetings (AGMs), we find that minority shareholders' attendance, especially the onsite attendance, significantly exacerbates firms' future crash risk. The results are robust to instrumental variable approach, placebo tests, and alternative measures of minority shareholders' attendance and crash risk. We also find three channels: incremental analyst following, media coverage and retail attention, all of which expand market pressure and exacerbate managers' incentives to withhold bad news. Extended analyses show that the impact of minority shareholders' attendance is less pronounced among firms with better investor protection. Overall, our findings are helpful to understand the importance of minority shareholders' activism and its unintended consequences on stock market in the emerging economies. |
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