The Impact Of Culture On Stock Price Crash Risk

At the beginning of 2020,the COVID-19 epidemic triggered substantial volatility in domestic and foreign stock markets,and many companies such as Zhao Xin Energy and Luckin Coffee caused stock prices to crash due to financial fraud.The crash of the stock prices of listed companies has severely damaged the interests of investors,undermined investors’ self-confidence in the market,and is not conducive to the steady development of the capital market.Therefore,the study of stock price crash risk is of great importance.Existing literature have shown that the main cause of the stock price crash is that the management conceals the negative news of the company.However,most of the current research on the stock price crash is limited to the formal institution level,and the informal institution has impact on the company management.The impact of concealing negative news is far-reaching,so according to the theory of information asymmetry and principal-agent theory,this article is based on the existing foundation to study the impact of collectivism on the stock price crash risk.This article takes China’s A-share main board market from 2000 to 2019 excluding companies in the financial industry as the research object,and uses the proportion of rice planting in each city in 1957 to measure collectivism.This research found that:(1)The collectivism index is significantly negatively correlated with the stock price crash risk index,indicating that,the more collectivism,the lower the stock price crash risk of enterprises;(2)Compared with non-state-owned enterprises,The negative impact of corporate collectivism culture on stock price crash risk is more significant in state-owned enterprises;(3)In companies with better corporate governance,the negative impact of collectivism on stock price crash risk is significantly reduced or even insignificant,indicating that effective corporate governance decrease the impact of collectivism on stock price crash risk;(4)In areas with higher social trust,the negative impact of collectivism on explained variable is not significant,indicating that social trust decrease the impact of collectivism on stock price crash risk(5)Since the stock price crash is caused by the management concealing negative news,after analyzing the economic mechanism,we found that culture can significantly reduce the opacity of a company’s financial information,thereby reducing the company’s stock price crash risk.Finally,the robustness test of the article shows that the results of the article are robust after replacing the new proxy variables of the collectivism.Through the instrumental variables,the article’s conclusions remain robust after solving endogenous problems.This article expands the study of national culture on the capital market to the stock price crash risk.There is currently no domestic research on this aspect,and the Hofstede indicator is used in foreign research on this aspect to measure the national level collectivism.This does not apply to China.So this paper chooses rice culture to measure the collectivism of city,which enriches the measure of collectivism culture.National culture is very important form of expression in the informal institution.The research in this article also enriches the cross-study of the informal institution and the capital market.Finally,through the empirical conclusions drawn in this paper,relevant suggestions are made to the government and capital market regulators,investors and corporate shareholders to strengthen the cultural ethics of corporate management and stabilize the stable development of the corporate and capital markets.