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Are Corporate General Counsels in Top Management Effective Monitors? Evidence from Stock Price Crash Risk

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  • MD Al Mamun
  • Balasingham Balachandran
  • Huu Nhan Duong
  • Ferdinand A Gul

Abstract

We find that firms with a top management counsel (TMC) have lower stock price crash risk than other firms. We further show that firms with a TMC issue more negative relative to positive earnings guidance and use more negative relative to positive words in their annual report filings, compared to firms without a TMC. TMCs are more effective in mitigating crash risk when they serve on the board. Our findings support the monitoring role of TMCs in mitigating bad news hoarding, which, in turn, contributes to the reduction in crash risk.

Suggested Citation

  • MD Al Mamun & Balasingham Balachandran & Huu Nhan Duong & Ferdinand A Gul, 2021. "Are Corporate General Counsels in Top Management Effective Monitors? Evidence from Stock Price Crash Risk," European Accounting Review, Taylor & Francis Journals, vol. 30(2), pages 405-437, March.
    • Handle: RePEc:taf:euract:v:30:y:2021:i:2:p:405-437
    DOI: 10.1080/09638180.2020.1763819
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    Cited by:

    1. Michael, Michael & Ali, Muhammad Jahangir & Atawnah, Nader & Muniandy, Balachandran, 2022. "Fiduciary or loyalty? Evidence from top management counsel and stock liquidity," Global Finance Journal, Elsevier, vol. 52(C).
    2. Doron Reichmann & Rouven Möller & Tobias Hertel, 2022. "Nothing but good intentions: the search for equity and stock price crash risk," Journal of Business Economics, Springer, vol. 92(9), pages 1455-1489, November.
    3. Juhee Hwang & Cheol Lee & Giman Nam, 2024. "Classification Shifting and Future Stock Price Crash Risk," Australian Accounting Review, CPA Australia, vol. 34(1), pages 74-96, March.

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