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City Reputation and Stock Price Crash Risk: Evidence from China’s National Civilized City Award

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  • Yuyang Zhao
  • Wenwu Cai
  • Cheng Xiang

Abstract

As a top honor for the overall civilization of cities in mainland China, the National Civilized City (NCC) award reflects good city reputation of the award-winners. This study investigates whether and how NCC awards affect stock price crash risk. Using a staggered difference-in-differences model, we find that the NCC award significantly reduces local firms’ future crash risk. This effect is more pronounced among firms with a better corporate reputation, inferior internal governance, and weaker external monitoring. Mechanism tests show that the NCC award reduces crash risk by mitigating management opportunism and alleviating information opacity.

Suggested Citation

  • Yuyang Zhao & Wenwu Cai & Cheng Xiang, 2023. "City Reputation and Stock Price Crash Risk: Evidence from China’s National Civilized City Award," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(11), pages 3636-3655, September.
    • Handle: RePEc:mes:emfitr:v:59:y:2023:i:11:p:3636-3655
    DOI: 10.1080/1540496X.2023.2228460
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