Managerial Power,Corporate Governance And Stock Price Crash Risk

Recently,volatile capital market caused by sharp and repeated stock price crashes have stimulated the nerves of most investors and regulators.Therefore,how to effectively reduce the stock price crash risk has become the focus of academical and practical circles.Based on the research of Jin and Myers(2006),scholars have advanced a theory to explain the origin of stock price crash risk.Due to the selfish motivation,the management of company tend to conceal bad news.As the bad news accumulating inside the company,once bad news reach saturation,they could all be released into market.The following negative impact on company could lead to unaffordable stock crash.Management is the direct factor that cause stock price crash risk,so that how effective restrict and monitor managerial power is the key to decrease the stock price crash risk of listed companies.Using the samples of Chinese A-share listed companies from 2007 to 2016,this article empirically tested the relationship between managerial power and the stock price crash risk,and the influence of corporate exterior governance on the above relationship.The research demonstrates that(1)the managerial power has a significant positive relation with the stock price crash risk,that is,as the managerial power grew stronger,the stock price crash risk rose significantly.(2)Further,as a sort of exterior soft governance,the media coverage could distinctly restrain the above positive relation.But the institutional environment couldn't.(3)However,neither top-shareholder or independent directors could have apparent impact on the correlation between the managerial power and the stock price crash risk.We contribute to the existing studies in several ways.First,our study adds to the recent stream of research on the economic consequences of managerial power.Second,we provide empirical evidence of the governance function of media coverage and institutional environment.As showed in our study,media coverage can dig out and reveal the corporate information to improve the information transparency,thus to restraint managements' behaviors and to alleviate stock price crash risk.However,the institutional environment is proved a poor governance performance.In this sense,our study could provide reference to promote corporate governance in China.