Stock price crash risk: Review of the empirical literature

Abstract

We survey the burgeoning literature on the determinants and consequences of firm-specific future stock price crash risk. We synthesise a vast body of literature on the determinants of crash risk, identify weaknesses, and offer future research opportunities. We categorise the determinants into: (i) financial reporting and corporate disclosures, (ii) managerial incentives and managerial characteristics, (iii) capital market transactions, (iv) corporate governance mechanisms, and (v) informal institutional mechanisms. Despite a large body of research into the determinants of crash risk, very little research attention has been directed towards understanding the consequences of stock price crash.