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Do Regional Investment Preferences Affect Corporate Stock Price Crash Risk? Evidence from Chinese Listed Companies

Author

Listed:
  • Junkai Wang
  • Baolei Qi
  • Muhammad Istiaque Hossain
  • Haipeng Geng
  • Jameel Hussain Muhammad

Abstract

This article investigates the influence of regional investment preferences on corporate stock price crash risk. Using a sample of Chinese listed companies from 2006 to 2020, we find that companies located in regions with stronger investment preferences experience a lower risk of stock price crash. The analysis shows that regional investment preferences can reduce companies’ excessive investment behavior and speculative accounting practices, eventually reducing the stock price crash risk. Subsequent research reveals that stringent internal controls and external supervision can mitigate the impact of regional investment preferences on the likelihood of a company experiencing a stock price crash.

Suggested Citation

  • Junkai Wang & Baolei Qi & Muhammad Istiaque Hossain & Haipeng Geng & Jameel Hussain Muhammad, 2024. "Do Regional Investment Preferences Affect Corporate Stock Price Crash Risk? Evidence from Chinese Listed Companies," CESifo Economic Studies, CESifo Group, vol. 70(1), pages 51-68.
    • Handle: RePEc:oup:cesifo:v:70:y:2024:i:1:p:51-68.
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    File URL: http://hdl.handle.net/10.1093/cesifo/ifae002
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    More about this item

    Keywords

    investment preferences; stock price crash; excessive investment; earning management;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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