Government Decentralization And Stock Price Crash Risk Of State-owned Listed Companies

In the past decades,in order to improve the operating efficiency of state-owned enterprises,the government has continuously carried out the reform of delegating power in various ways,which has made a series of in-depth studies on the economic consequences of government decentralization.At present,the research on the economic consequences related to government decentralization is mainly carried out from several aspects such as investment decision,financial performance,enterprise value and executive compensation.The existing literature has not yet been deeply studied from the perspective of stock price crash risk.Theoretically,the economic consequences of government decentralization can be divided into two viewpoints: “Government Intervention Perspective” and “Agent Conflict Perspective”.“Government Intervention Perspective” emphasizes that government decentralization reduces the direct intervention of government on state-owned enterprises.It achieves the decentralization of decision-making power and improves the professionalism of employees.“Agent Conflict Perspective” represents that with the increase of government decentralization,the related agency costs of state-owned enterprises rise significantly,which will have a negative impact on the economic consequences of government decentralization.It can be seen that the current research on the economic consequences of government decentralization is far from consensus.Based on this,this paper uses the stock price crash risk of state-owned enterprises and the pyramid level to analyze the economic consequences of government decentralization.The specific issues include the following three points: first,using the pyramid hierarchy as a substitute variable for the government decentralization,test whether there is a significant correlation between government decentralization and the stock price crash risk of state-owned enterprises?Second,examine whether this relation more pronounced in the bear market?Third,this paper will deeply analyze the mechanism of government decentralization affecting stock price crash risk of state-owned enterprises.This paper takes all state-owned listed A-share companies from 2004 to 2017 as the research object,investigates the relationship between government decentralization and stock price crash risk,and how government decentralization affect stock price crash risk.We provide strong evidence that government decentralization is positively associated with stock price crash risk.Second,this relation is more pronounced in the bear market.Thirdly,this paper finds that there is a significant positive correlation between the government decentralization and the executive compensation and the non-efficiency investment.It provides further evidence for the “Agent Conflict Perspective”.At the same time,this paper finds that there is a significant positive correlation between government decentralization and stock price crash risk of state-owned enterprises in the group with low proportion of independent directors,low proportion of institutional investors,and fewer analysts tracking.This shows that a better internal and external governance mechanism can effectively alleviate the agency problem of state-owned enterprises,restrain the agency cost of enterprises and play a corresponding role of supervision and governance.All in all,the conclusion of this paper provides a new explanation for the concept of “Government Intervention Perspective”.On the theoretical level,the research in this paper helps to provide new evidence for the economic consequences of government decentralization and stock price crash risk.At the same time,it helps to further expand the specific mechanism of the government decentralization affecting stock price crash risk,and provides relevant empirical evidence for the “Agent Conflict Perspective”.On the practical level,the academic community generally believes that government decentralization can reduce government intervention in state-owned enterprises.But after the government reduces intervention,enterprises still need to improve corporate governance mechanisms if state-owned enterprises want to obtain a good performance.In particular,it should improve the incentive and supervision mechanism for senior executives of state-owned enterprises.Therefore,the conclusions of this paper can reveal that government must optimize the incentives and supervision of senior executives,improve internal and external supervision mechanisms.