Local Economic Performance, Political Promotion, and Stock Price Crash Risk: Evidence from China

Li, Qian; Guo, Mengting

doi:10.1080/1540496x.2020.1809373

Cited by 9 publications

(4 citation statements)

References 27 publications

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“…Therefore, Iranian companies are expected to refrain from disclosing the adverse effects of the current economic situation on the financial performance of their companies to present a better corporate financial image. When performance pressures on managers over certain periods are so great, they engage in profit management actions that ultimately lead to stock falls [53]. As mentioned earlier, when hiding the negative effects of the current economic situation on companies' financial performance reaches its peak, managers are forced to disclose them.…”

Section: Research Background and Hypotheses Developmentmentioning

confidence: 99%

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Macroeconomic Factors and Stock Price Crash Risk: Do Managers Withhold Bad News in the Crisis-Ridden Iran Market?

et al. 2021

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The present study aims to investigate the effects of macroeconomic variables on stock price crash risk in the economically uncertain conditions of Iran’s market. This study also seeks to examine whether there is a significant relationship between some firm characteristics and falling stock prices. The sample of the study includes 152 Iranian companies listed on the Tehran Stock Exchange (TSE) between 2014 and 2019. Furthermore, the research model has been estimated using a fixed effect pattern, and the DUVOL (down-to-up volatility) measure is defined as a proxy for stock price crash risk. Consistent with our expectations, the results show that there is a positive association between the inflation and unemployment rates and stock price crash risk, whereas the GDP and exchange rates are correlated negatively with crash risk. In fact, with rising inflation and unemployment, on the one hand, the amount of savings and the purchasing power of the people have decreased, and on the other hand, it has reduced the sales of companies due to the increase in the pricing of manufactured products. In Iran’s economically uncertain situation due to sanctions, managers are trying to overstate financial performance and conceal bad news to have better access to financing; so, when the total amount of bad news accumulated over time reaches a tipping point, it leads to a stock crash. It also appears that when the exchange rate rises, Iranian investors prefer to buy companies’ shares to maintain the purchasing power of their money. Outcomes also confirm that larger firms and those with higher Return on Assets (ROA) are more sensitive to crash risk.

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Section: Research Background and Hypotheses Developmentmentioning

confidence: 99%

“…In the financial literature, inflation has been considered as one of the most important economic variables affecting stock prices [45,46,53,56,57]. Market equilibrium does not arise based on nominal values, and investors consider inflation to be one of the most important macroeconomic variables influencing investment decision-making.…”

Section: Hypothesismentioning

confidence: 99%

Macroeconomic Factors and Stock Price Crash Risk: Do Managers Withhold Bad News in the Crisis-Ridden Iran Market?

et al. 2021

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“…This study also expands the literature on the role of political promotion incentives in China. Prior studies suggest that state officials' promotion incentives can influence the behavior and performance of firms, including financial performance [97], green innovation [98], labor investment efficiency [99], pollution discharges [14], and stock price behavior [100,101]. Unlike their primary focus on political promotion or turnover events, this study concentrates on the overall impact of officials' promotion incentives on firm behavior throughout their tenure and how this impact changes, revealing the double-edged sword effect of promotion incentives on CSR.…”

Section: Theoretical Implicationsmentioning

confidence: 99%

Do political incentives promote or inhibit corporate social responsibility? The role of local officials’ tenure

2023

PLoS ONE

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The existing literature on corporate social responsibility (CSR) drivers focuses on firm- and institution-level factors and rarely on the role of political incentives. Public officials control enormous resources in China, and their political incentives substantially shape certain firm behaviors. As CSR is one of the critical measures that the central government uses to evaluate the performance of local government, local officials have the incentive to channel firms into accomplishing their political goals. Correspondingly, local firms may strategically implement CSR to build a good relationship with local governments. This study investigates the impact of local officials’ political incentives (measured by tenure) on firms’ CSR. Using a panel of publicly listed Chinese firms covering 2009–2019, it documents a U-shaped effect of government officials’ tenure on the CSR performance of firms within their jurisdiction. To wit, the firm’s CSR decreases first and then increases with the growth of tenure. Moreover, this U-shaped effect will be strengthened in regions with a high priority of gross domestic product (GDP) growth and will be weakened in regions with good market development. In addition, there is no significant evidence that party officials’ tenure affects firms’ CSR. Overall, this study advances our understanding of the political determinants of CSR in emerging markets.

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“…Hasil penelitian ini menunjukan bahwa semakin tidak efisien alokasi investasi maka semakin tinggi risiko penurunan harga saham di masa depan. Hasil penelitian ini sejalan dengan hasil penelitian Habib & Hasan (2017), Pereira, et al (2018, serta Li & Guo (2020) yang menunjukan bahwa efisiensi investasi berpengaruh positif terhadap risiko penurunan harga saham. Atas dasar penelitian ini menunjukan bahwa jika ada penundaan informasi atas ketidak efisiensian investasi seperti investasi berlebihan atau rendahnya investasi ketika diinformasikan di masa yang akan datang akan direspon negatif oleh investor sehingga beresiko untuk menurunkan harga saham perusahaan.…”

Section: Tabel 2 Statistik Desktiptifunclassified

Pengaruh Tingkat Percaya Diri CEO terhadap Risiko Penurunan Harga Saham dengan Efisiensi Investasi sebagai Mediasi

Yusuf

2021

E-Jurnal Akuntansi

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CEO has a role to make investment decisions. Age, education and work experience are factors can effect the CEO's confidence level to making decisions. When the investment decisions biased and risk lowering the company's performance, there will be a CEO's decision to delay bad information. Long delays bad information will increase stock price crash risk on future. Therefore, the purpose of this study is to examine the effect of the CEO's confidence level on future stock price crash risk with investment efficiency as a mediation. The manufacturing sector is used as the object of research with 98 companies as research samples with a research period from 2011-2019. Path analysis was used as an analytical technique and Sobel test as a measure of mediation. The results of this study prove that investment efficiency is able to mediate the effect of CEO's confidence level on future stock price crash risk. Keywords: CEO's Confidence Level; Investment Efficiency; Future Stock Price Decrease Risk.

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Local Economic Performance, Political Promotion, and Stock Price Crash Risk: Evidence from China

Cited by 9 publications

References 27 publications

Macroeconomic Factors and Stock Price Crash Risk: Do Managers Withhold Bad News in the Crisis-Ridden Iran Market?

Macroeconomic Factors and Stock Price Crash Risk: Do Managers Withhold Bad News in the Crisis-Ridden Iran Market?

Do political incentives promote or inhibit corporate social responsibility? The role of local officials’ tenure

Pengaruh Tingkat Percaya Diri CEO terhadap Risiko Penurunan Harga Saham dengan Efisiensi Investasi sebagai Mediasi

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