Abstract
The purpose of this paper is to examine whether product market competition is a means of external shareholders’ protection likely to decrease the stock price crash risk. The results show that product market competition is an effective corporate governance mechanism that is likely to constrain managers to disclose bad news regularly to the market, which in turn mitigates the risk of stock price crashes. The results also show that the negative effect of product market competition on stock price crashes is more pronounced for owner-managers. These results suggest that managerial ownership is likely to align managerial interests with shareholders ones.
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