Firms’ Engagement in Poverty Alleviation Campaign and Stock Price Crash Risk: Evidence from China

Abstract

ABSTRACT This study explores the relationship between firms’ engagement in poverty-alleviation campaigns and stock price crash risk. We use a large sample of Chinese firms listed on Shanghai and Shenzhen stock markets and find that firms’ engagement in poverty alleviation campaigns is positively associated with future stock price crash risk. Moreover, the positive relationship between firms’ engagement in poverty alleviation campaigns and crash risk is more pronounced for state-owned enterprises and firms with relatively concentrated ownership. However, this is less pronounced for those with higher analyst and media coverage. Our results are consistent with the agency theory, suggesting that engaging in poverty alleviation campaign may facilitate managers’ bad news hoarding behavior and increase stock price crash risk.