Social Integrity and Stock Price Crash Risk
Journal of Business Ethics, ISSN: 1573-0697, Vol: 190, Issue: 3, Page: 703-721
2024
- 5Citations
- 26Captures
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Example: if you select the 1-year option for an article published in 2019 and a metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019. If you select the 3-year option for the same article published in 2019 and the metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019, 2018 and 2017.
Citation Benchmarking is provided by Scopus and SciVal and is different from the metrics context provided by PlumX Metrics.
Article Description
We examine whether the level of integrity in a society, i.e., social integrity, affects stock price crash risk. We explore two competing hypotheses. On the one hand, exposure to high levels of integrity may reduce managers’ incentives to obfuscate information, thereby leading to lower crash risk. On the other hand, social integrity may weaken outsiders’ monitoring of managerial behaviors, thus giving managers more opportunities to obfuscate information and, consequently, leading to higher crash risk. Using a sample of Chinese listed firms, we find that firms located in regions with higher integrity have lower future stock price crash risk. This result is confirmed by a difference-in-difference analysis with an exogenous shock to social integrity. Further analysis suggests that increased information transparency is a potential channel through which social integrity affects stock price crash risk. Cross-sectional analyses suggest that the negative effect of social integrity on crash risk is more pronounced in firms with weaker internal control systems and firms with less negative media coverage. Overall, our study provides novel evidence that the ethical environment plays a significant role in shaping business ethics and influencing stock price crash risk.
Bibliographic Details
Springer Science and Business Media LLC
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