Corporate diversification and stock price crash risk: Do female directors matters? Evidence from Malaysia

Lee, Kian-Tek

doi:10.21315/aamjaf2022.18.1.4

Cited by 7 publications

(14 citation statements)

References 67 publications

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“…Table 3 presents the descriptive statistics covering the correlation matrix and summary statistics. Focusing on the main variables (PCR and SCF), the mean value of DUVOL is −0.104, slightly lower than the reported DUVOL of −0.191 by Lee et al . (2019) for Malaysian listed firms from 2010 to 2015.…”

Section: Resultscontrasting

confidence: 78%

“…(2019) for Malaysian listed firms from 2010 to 2015. Nevertheless, the mean value of NCSKEW in Table 3 is −0.354, slightly higher than Lee et al . (2019).…”

Section: Resultscontrasting

confidence: 65%

“…Focusing on the main variables (PCR and SCF), the mean value of DUVOL is À0.104, slightly lower than the reported DUVOL of À0.191 by Lee et al (2019) for Malaysian listed firms from 2010 to 2015. Nevertheless, the mean value of NCSKEW in Table 3 is À0.354, slightly higher than Lee et al (2019). The reported PCR also implies that Malaysia has a relatively higher risk of price crash than the world's PCR (DUVOL 5 À0.027, NCSKEW 5 À 0.105) reported by Hu et al (2020).…”

Section: Findings 41 Descriptive Statisticscontrasting

confidence: 61%

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Does sharia-compliant debt financing reduce stock price crash risk?

Kontesa¹

2023

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PurposeThis paper examines the impact of sharia-compliant debt financing on stock price crash risk. Unlike those previous studies that took Sukuk or sharia-compliant firms, this study tests the impact of the proportion reported sharia-compliant debt financing in the balance sheet on the risk of price crash of a firm.Design/methodology/approachUsing the data from 2,752 firm-year observations of 344 Malaysian non-financial listed companies from 2012 to 2019, this article used a robust panel data estimation technique for statistical inferences. This study also employs panel GMM and quantile least squares as the robustness check.FindingsThis study established a negative relationship between sharia-compliant debt financing and stock price crash risk. The robustness checks with different estimation techniques confirm the results. It implies that firms with a more significant proportion of Sharia-compliant financing tend to have lower future stock price crash risk.Practical implicationsConsistent with the Islamic finance literature, the present study contributes to the existing literature on Islamic capital markets from the perspective of stock price crash risk because it is vital for risk management and investment decision-making as a measure of tail risk for stocks. The findings of this research will assist investors in developing portfolio strategies that incorporate firms with higher levels of sharia-compliant debt financing in their balance sheets. Additionally, the results of this study suggest that policymakers and regulatory bodies should consider revising their monitoring approaches for publicly listed firms.Originality/valueThis study is interesting and unique, as it is a pioneer in testing the impact of sharia-compliant debt financing on reducing stock price crash risk.

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Section: Resultscontrasting

confidence: 78%

“…(2019) for Malaysian listed firms from 2010 to 2015. Nevertheless, the mean value of NCSKEW in Table 3 is −0.354, slightly higher than Lee et al . (2019).…”

Section: Resultscontrasting

confidence: 65%

Section: Findings 41 Descriptive Statisticscontrasting

confidence: 61%

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Does sharia-compliant debt financing reduce stock price crash risk?

Kontesa¹

2023

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“…The mean values of future stock price crash risk measures, NCSKEW t +1 and DUVOL t +1 are −0.259 and −0.195, respectively. The mean and standard deviation of DUVOL are roughly close to the statistics reported by Callen and Fang (2013), Chen et al (2001), and particularly Lee et al (2019) in Malaysia. Although financial firms in Malaysia are regulated by Bank Negara Malaysia to establish a separate RC, only 59.8% of sample firms set up a stand-alone RC.…”

Section: Empirical Analysissupporting

confidence: 81%

Risk committee and stock price crash risk in the Malaysian financial sector: the moderating role of institutional ownership

Al‐Dhamari

Nor

Farooque

et al. 2022

JAEE

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PurposeThe authors empirically investigate the impact of the existence of a stand-alone risk committee (RC) and its characteristics on the likelihood of stock price crash risk in listed financial firms on the Bursa Malaysia. The authors also test whether the effect of RC on crash risk is attenuating or amplifying by the level of institutional ownership.Design/methodology/approachThe authors use a principal components analysis (PCA) to aggregate and derive a factor score for risk committee characteristics (i.e. independence, qualification, and size) as a proxy for the effectiveness of RC. The study also employs two distinct stock price crash risk measurements to corroborate the findings and partition institutional ownership into dedicated and transient to examine the potential impact of institutional shareholding on RC-stock price crash risk association.FindingsRegression analysis reveals that only RC qualification has a significant negative impact on stock price crash risk. However, when RC characteristics are aggregated into one composite factor, the authors find that firms with effective RCs exhibit lower risk of stock price crash. The authors also find that firms with high level of institutional shareholdings and effective RCs are less likely to experience crash risk likelihood. The additional analyses indicate that the complementary moderating effect of institutional ownership on RC-crash risk nexus is likely to be driven by dedicated institutional ownership. The results are robust across two measures of stock price crash risk and regression specifications for a longer run window.Originality/valueThe study, to the best of the researchers' knowledge, is the first to provide evidence in an emerging market financial sector companies' perspective suggesting that effective RCs are individually and aggregately associated with lower stock price crash risk, which is further strengthened by dedicated institutional investors. These findings are unique and contribute to a small but growing body of literature documenting the need for effective RCs and specific institutional investors and their consequences of improvements in stock price crash risk environment. Results of our research in this area provide important insights to financial and capital market participants, investors, regulators, and policymakers in Malaysia.

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“…Meanwhile, the crash risk literature offers an alternative performance measure that reflects agency problems (Jin & Myers, 2006). However, only a few studies have examined the relationship between diversification and crash risk, which also have provided mixed conclusions (Lee et al, 2019;Qi & Diao, 2020;Wang et al, 2023). Environmental heterogeneity across the country exacerbates bad newshoarding behavior, such as less developed financial and poor corporate governance systems, and positively affects crash risk (Jin & Myers, 2006).…”

Section: Introductionmentioning

confidence: 99%

Corporate diversification and crash risk: Evidence in East Asian firms

Hendra,

Utama,

Lubis

et al. 2024

JEECAR

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This study examines the impact of corporate diversification on crash risk in East Asian firms. We selected East Asian firms as the research sample due to unique features that might facilitate agency problems there, such as lower investor protection, more concentrated ownership among firms, and less developed institutional contexts in emerging economies. This study proposes two competing effects explaining the mechanisms of how diversification exacerbates or mitigates crash risk among East Asian firms: information complexity and diversification capacity effects. This study employs a pooled ordinary least-square (OLS) regression on a sample of publicly listed firms in six East Asian countries from 2014 to 2019. Consistent with the diversification capacity effect, our results show that diversification mitigates crash risk among East Asian firms.

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Corporate diversification and stock price crash risk: Do female directors matters? Evidence from Malaysia

Cited by 7 publications

References 67 publications

Does sharia-compliant debt financing reduce stock price crash risk?

Does sharia-compliant debt financing reduce stock price crash risk?

Risk committee and stock price crash risk in the Malaysian financial sector: the moderating role of institutional ownership

Corporate diversification and crash risk: Evidence in East Asian firms

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