Please use this identifier to cite or link to this item: https://hdl.handle.net/10356/90182
Title: Stock liquidity and stock price crash risk
Authors: Chang, Xin
Chen, Yangyang
Zolotoy, Leon
Keywords: Stock Liquidity
Stock Price
DRNTU::Business::Operations management
Issue Date: 2017
Source: Chang, X., Chen, Y., & Zolotoy, L. (2017). Stock Liquidity and Stock Price Crash Risk. Journal of Financial and Quantitative Analysis, 52(4), 1605-1637. doi:10.1017/S0022109017000473
Series/Report no.: Journal of Financial and Quantitative Analysis
Abstract: We find that stock liquidity increases stock price crash risk. To identify the causal effect, we use the decimalization of stock trading as an exogenous shock to liquidity. This effect is increasing in a firm’s ownership by transient investors and nonblockholders. Liquid firms have a higher likelihood of future bad earnings news releases, which are accompanied by greater selling by transient investors, but not blockholders. Our results suggest that liquidity induces managers to withhold bad news, fearing that its disclosure will lead to selling by transient investors. Eventually, accumulated bad news is released all at once, causing a crash.
URI: https://hdl.handle.net/10356/90182
http://hdl.handle.net/10220/47221
ISSN: 0022-1090
DOI: 10.1017/S0022109017000473
Rights: © 2017 Michael G. Foster School of Business, University of Washington. This paper was published in Journal of Financial and Quantitative Analysis and is made available as an electronic reprint (preprint) with permission of Michael G. Foster School of Business, University of Washington. The published version is available at: [http://dx.doi.org/10.1017/S0022109017000126]. One print or electronic copy may be made for personal use only. Systematic or multiple reproduction, distribution to multiple locations via electronic or other means, duplication of any material in this paper for a fee or for commercial purposes, or modification of the content of the paper is prohibited and is subject to penalties under law.
Fulltext Permission: open
Fulltext Availability: With Fulltext
Appears in Collections:NBS Journal Articles

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