Crash Risk Research Articles

The role of biodiversity risk in stock price crashes

This study examines whether and how firms’ biodiversity risk exposure affects future stock price crash risk. By analyzing data from US listed companies, we find a significant and positive association between biodiversity risk exposure and future crash risk. The additional analysis indicates that the biodiversity-related transition risks caused by regulations still significantly increase future crash risk, but management's sentiment toward biodiversity-related issues does not significantly affect future crash risk.

Does Exchange-traded Fund Ownership Affect a Firm’s Expected Crash Risk?

We examine the effect of equity ownership by exchange-traded funds (ETFs) on the expected (ex ante) crash risk of the underlying securities. We observe a positive relationship between ETF ownership and the firm’s expected crash risk. Our findings suggest that ETFs increase information opacity, leading managers to withhold negative news, which in turn amplifies the anticipated crash risk. We demonstrate a positive causal relationship between ETFs and expected crash risk by using the Russell 1000/2000 index reconstitution as an instrument for ETF ownership and ETF initiation as staggered exogenous shocks on ETF ownership. Moreover, this association becomes more noticeable when ETF ownership is broader, the ETF is larger, and the company’s information environment is more opaque.

Share pledge and accounting conservatism in share-pledging firms: Evidence from a natural experiment in China.

This paper focuses on firms in which insiders pledge their shares as collateral for loans. By investigating a natural experiment-China's enactment of provisions on share reductions that restrict pledge creditors' cashing-out behavior-we find that pledging firms exhibited more conservative financial reporting after the implementation than non-pledging firms. This effect was pronounced in firms with a higher ratio of pledged shares, a longer maturation period of the pledged shares, and more concentrated pledge creditors. Additionally, we show that pledging firms increased their accounting conservatism after the shock, leading to a lower risk of margin calls and stock price crashes. The effect on accounting conservatism was stronger in firms with controlling pledgers or when the pledge creditors were banks. Our results remained consistent after we performed several robustness tests. These behaviors are economically logical because the provisions heighten creditors' liquidity risk and the potential losses of loan default. Pledging shareholders embrace more accounting conservatism to mitigate creditors' concerns about agency costs and avoid triggering margin calls. Our findings provide direct support that creditors have a real demand for accounting conservatism and highlight the impact of shareholder-creditor conflicts on the financial reporting policies of pledging firms.

Audit committee personnel training and stock price crash risk

This study examines whether audit committee personnel training decreases future stock price crash risk. Using a hand-collected Korean sample comprising 2,378 firm-year observations from 2018 to 2022, we find that audit committee personnel training reduces future stock price crash risk by lowering real earnings management and curbing overinvestment. Additionally, our findings are more pronounced for firms with high information reporting opacity, high information asymmetry, audit committee chairs with accounting and financial expertise, and firms audited by high-quality auditors. The findings shed light on the value of training to audit committee personnel.

An investigation of relationships between aberrant driving behavior and crash risk among long-haul truck drivers traveling across India: A Structural Equation Modeling approach

IntroductionRoad Traffic Crashes (RTC) are showing an increasing trend around the world. Empirical evidence suggests that the majority of the crashes are attributed to unsafe or dangerous driving behaviors among drivers. However, little is known about the crash risk among professional drivers such as Long-Haul Truck Drivers (LHTDs) considering aberrant driving behaviors in developing countries like India. Objectives: This study aims to investigate the direct effects of characteristics of LHTDs including socio-demographic, work and vehicle, health-related lifestyle on crash risk. This study also attempts to investigate the indirect impacts of socio-demographic characteristics on crash involvement among LHTDs mediated through aberrant driving behaviors. MethodsUsing cross sectional study design, face-to-face interviews were conducted among LHTDs in Salem city, Tamil Nadu, India. A Driver Behavior Questionnaire (DBQ) consisting of 23 items was utilized to measure aberrant driving behaviors among LHTDs and information related to background variables was also collected. A total of 756 valid samples were used for analysis purpose. Exploratory factor analysis confirmed a four-factor solution including errors, lapses, ordinary, and aggressive violations and the identified structure was validated using confirmatory factor analysis. The deployment of Structural Equation Model (SEM) enabled identification of interrelationships among identified latent and observed variables. Results: The developed SEM model showed that all the identified four latent constructs were positively associated with crash involvement among LHTDs. The results further revealed that age and marital status were found to exhibit an indirect impact on crash involvement in addition to direct effects. ConclusionThe findings from this study could serve road safety authorities and Indian trucking industries to target risky driving behaviors in order to develop engineering and interventional countermeasures.

Narrative innovation disclosure and stock price crash risk: Evidence from Chinese listed firms

Using the 2012 revision of Guideline No. 2, we construct a difference-in-differences model to investigate the impact of narrative innovation disclosure on stock price crash risk among Chinese A-share listed firms from 2008 to 2020. We find that narrative innovation disclosure positively affects a firm’s crash risk. From the dual perspectives of the discloser and receiver, we reveal the mechanism. The strategic behaviors of firms with limited creativity, combined with investors’ challenges in fully comprehending innovations, contribute to increased information asymmetry and reduced the quality of disclosures, thereby rising stock price crash risks. Furthermore, we show that the impact of innovation disclosure on crash risk is more significant in firms operating within poor legal and market environments, and in those with overvalued stock prices. This study provides suggestions for improving the innovation disclosure system to reduce stock price crash risks and promote stability in capital markets for emerging countries.

Does liquidity connectedness affect stock price crash risk? Evidence from China

Using a sample of CSI300 over the 2006–2021 period to establish liquidity spillover networks, we find a significantly negative relationship between liquidity connectedness and stock price crash risk. Further analysis shows that liquidity connectedness depresses stock price crash risk through two potential channels: increased conditional conservatism and decreased stock price synchronicity. Moreover, this effect is more prominent for firms with effective external monitoring, firms with lower risk-taking, and state-owned enterprises (SOEs). Overall, our paper shows that liquidity connectedness is an important factor influencing crash risk and provides useful guidance for corporate management and investor decision-making.

Non-benzodiazepine Hypnotics and Police-Reported Motor Vehicle Crash Risk among Older Adults: A Sequential Target Trial Emulation.

Non-benzodiazepine hypnotics ( "Z-drugs") are prescribed for insomnia, but might increase risk of motor vehicle crash (MVC) among older adults through prolonged drowsiness and delayed reaction times. We estimated the effect of initiating Z-drug treatment on the 12-week risk of MVC in a sequential target trial emulation. After linking New Jersey driver licensing and police-reported MVC data to Medicare claims, we emulated a new target trial each week (July 1, 2007 - October 7, 2017) in which Medicare fee-for-service beneficiaries were classified as Z-drug-treated or untreated at baseline and followed for an MVC. We used inverse probability of treatment and censoring weighted pooled logistic regression models to estimate risk ratios (RR) and risk differences with 95% bootstrap confidence limits (CLs). There were 257,554 person-trials, of which 103,371 were Z-drug-treated and 154,183 untreated, giving rise to 976 and 1,249 MVCs, respectively. The intention-to-treat RR was 1.06 (95%CLs 0.95, 1.16). For the per-protocol estimand, there were 800 MVCs and 1,241 MVCs among treated and untreated person-trials, respectively, suggesting a reduced MVC risk (RR 0.83 [95%CLs 0.74, 0.92]) with sustained Z-drug treatment. Z-drugs should be prescribed to older patients judiciously but not withheld entirely over concerns about MVC risk.

Exploring the impact of customer concentration on stock price crash risk

This paper, rooted in agency theory, explores the intricate relationship between stock price crash risk and customer concentration within the context of Iran, a developing nation. Utilising innovative indicators to measure corporate and government customers, we address inconsistent findings in existing research and offer fresh insights into stock price crash risk dynamics. Focusing on 82 companies listed on the Tehran Stock Exchange from 2013 to 2020, our study employs a robust methodological framework, including panel data, multiple regression and three distinct metrics to measure customer concentration. Specifically, we introduce the proportion of significant customer sales, the Herfindahl-Hirschman Index, and a Ranking Index based on substantial customer sales. Our investigation reveals a noteworthy inverse relationship between the highest concentration level of corporate customer concentration, as measured by the Ranking Index, and stock price crash risk. Similarly, we establish an inverse association between the Ranking Index for government customer concentration and stock price crash risk. Moreover, institutional investors positively influence the correlation between corporate customer concentration and stock price crash risk but do not exert a discernible impact on the relationship between government customer concentration and stock price crash risk.

Assessing network-based traffic crash risk using prospective space-time scan statistic method

As car ownership and urbanization continue to rise worldwide, traffic crashes have become growing concerns globally. Measuring crash risk provides insight into understanding crash patterns, which can eventually support proactive transport planning and improve road safety. However, traditional spatial analysis methods for crash risk assessment, such as the hotspot detection method, are mainly focused on identifying areas with higher crash frequency. These methods are subject to critical issues in risk analysis due to ignoring crash impacts and background traffic volume information. Aside from the two issues, current crash risk assessment methods, especially those aiming for cluster detection, are subject to the modified temporal unit problem, referring to the temporal effects (i.e., aggregation, segmentation, and boundary) in cluster detection. To alleviate these issues, this paper applies an emerging hot spot detection method, called the prospective space-time scan statistic (STSS) method, for assessing the crash risk at a refined network scale and over multiple years in a case study of Hartford, Connecticut. By identifying the spatial and temporal clusters of the crash risk, the study can provide evidence for tailoring road safety management strategies in neighborhoods characterized by high crash risk.

Road hazard: a systematic review of traffic injuries following recreational cannabis legalization.

Acute cannabis use is associated with impaired driving performance and increased risk of motor vehicle crashes. Following the Canadian Cannabis Act's implementation, it is essential to understand how recreational cannabis legalization impacts traffic injuries, with a particular emphasis on Canadian emergency departments. This study aims to assess the impact of recreational cannabis legalization on traffic-related emergency department visits and hospitalizations in the broader context of North America. A systematic review was conducted according to best practices and reported using PRISMA 2020 guidelines. The protocol was registered on July 5, 2022 (PROSPERO CRD42022342126). MEDLINE(R) ALL (OvidSP), Embase (OvidSP), CINAHL (EBSCOHost), and Scopus were searched without language or date restrictions up to October 12, 2023. Studies were included if they examined cannabis-related traffic-injury emergency department visits and hospitalizations before and after recreational cannabis legalization. The risk of bias was assessed. Meta-analysis was not possible due to heterogeneity. Seven studies were eligible for the analysis. All studies were conducted between 2019 and 2023 in Canada and the United States. We found mixed results regarding the impact of recreational cannabis legalization on emergency department visits for traffic injuries. Four of the studies included reported increases in traffic injuries after legalization, while the remaining three studies found no significant change. There was a moderate overall risk of bias among the studies included. This systematic review highlights the complexity of assessing the impact of recreational cannabis legalization on traffic injuries. Our findings show a varied impact on emergency department visits and hospitalizations across North America. This underlines the importance of Canadian emergency physicians staying informed about regional cannabis policies. Training on identifying and treating cannabis-related impairments should be incorporated into standard protocols to enhance response effectiveness and patient safety in light of evolving cannabis legislation.

The bright side of common ownership: Evidence from bank transparency

Over 74% of US banks share common ownership with other banks. Our analysis of a large sample of US banks reveals that those with greater common ownership demonstrate heightened transparency. This manifests as reduced discretion in loan loss provisions, improved financial statement readability, and enhanced comparability. We pinpoint three underlying mechanisms: decreased private information gathering, increased stock liquidity, and diminished managerial incentives for opacity. Furthermore, these commonly owned banks exhibit lower crash risk due to their improved transparency. Our findings hold after using various proxies and two endogeneity-reduction methods: a difference-in-differences analysis based on the 2009 Blackrock–Barclays Global Investors merger and an instrumental variable approach using Russell 2000 index inclusions. Overall, our study underscores the positive impact of common ownership in the banking sector.

Bank Competition, Loan Portfolio Concentration and Stock Price Crash Risk: The Role of Tone Ambiguity

AbstractWe examine the association between loan portfolio concentration, competition and stock price crash risk in the US banking industry. We find that during economic downturns, banks with poorly diversified loan portfolios that operate in competitive markets are more likely to crash. Importantly, we show that this link is channelled through aggressive earnings management and ambiguous annual reports. Therefore, managerial ambiguity can serve as an early warning signal of information obfuscation, which can eventually lead to stock price crashes. As a quasi‐natural experiment, we use the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act in 2018. This policy lowered the regulatory requirements and oversight for a specific group of large banks. The results of a difference‐in‐differences analysis support our baseline findings and add to the ongoing debate on the roots of the 2023 banking crisis. Therefore, our findings can be informative to market participants, regulators and policy makers.

Corporate litigation and stock price crash risk: evidence from China

ABSTRACT As judicial systems in emerging economies grow increasingly sophisticated, corporate litigation is emerging as a powerful mechanism for corporate governance. Focusing on the Chinese financial market, our research examines the impact of corporate litigation on stock price crashes risk. Our findings indicate that corporate entanglement in lawsuit leads to a notable reduction in stock price crash risk, and an increase in both the frequency and magnitude of litigation correlates with a diminished stock price crash risk. A deeper analysis reveals that capital-related litigation exerts a more pronounced effect on stock price crash risk than product-related litigation and other types litigation. Mechanism analysis suggests that corporate litigation mitigates crash risk by improving the quality of information disclosure. Additionally, we observe that the inverse relationship between corporate litigation and crash risk is particularly pronounced for firms with lower level of external monitoring.

Federal judge ideology, securities class action litigation, and stock price crash risk

AbstractThis study investigates whether and how federal judge ideology affects firm‐specific stock price crash risk. Using a comprehensive sample of US firms, we find a decline in the likelihood of future stock price crashes for firms headquartered in more liberal circuits. In identifying potential mechanisms, we show that liberal judge ideology reduces information opacity, risk‐taking behaviours and overinvestment, and thus curbs stock price crash risk. Furthermore, the curbing effect is more salient for firms with poor monitoring quality and those in low social capital areas. Overall, this study elucidates how federal judge ideology affects capital markets.

Policy synergy on stock price crash risk: An intergovernmental perspective

Both central and local government policies present implications for companies and investors. While several studies evidence that government policies shape corporate behaviors, few studies have explored them from an intergovernmental view. This research constructs a new measurement of intergovernmental policy synergy with text-based tools and reveals an inverted U-shaped relation between central-local policy synergy and stock price crash risk, which still holds after checking robustness. Furthermore, we validate corporate greenwashing and divergence of investors’ opinion as underlying mechanisms. Additionally, the relation is more prominent among firms without online interactive platform and firms with high web search intensity.

In-vehicle nudging for increased Adaptive Cruise Control use: a field study

Close following to lead vehicles is associated with increased risk of rear-end crashes in road traffic. One way to reduce instances of close following is through increased use of the Advanced Driver Assistance System (ADAS) Adaptive Cruise Control (ACC), which is designed to adjust vehicle speed to maintain a safe time headway. Since the activation of ACC is driver-initiated, there is a need to influence the propensity of drivers to use the function. This research aimed to explore whether in-vehicle nudging interventions could be effective for this purpose. A field trial was conducted to consecutively assess the effects of two nudges on drivers’ utilization of ACC, compared to baseline usage. Exposing the participants (n = 49) to the first ambient design nudge resulted in a 46% increase in ACC usage on average. Following the introduction of the second nudge (a competitive leaderboard nudge), the average increase among participants (n = 48) during the complete treatment period reached 61%. The changes in ACC utilization varied between individual drivers, highlighting the need to monitor behavioral outcomes of nudges and adapt them when needed. In conclusion, this research shows that utilizing in-vehicle nudging is a promising approach to increase the use of vehicle functions contributing to improved traffic safety.

Different deployments of attentional breadth selectively predict UFOV task performance in older adults

The Useful Field of View task (UFOV) is a strong and reliable predictor of crash risk in older drivers. However, while the functional domain of attention is clearly implicated in UFOV performance, the potential role of one specific attentional process remains unclear: attentional breadth (the spatial extent of the attended region around the point of visual fixation). The goal of the present study was to systematically test the role of two distinct aspects of attentional breadth, maintaining a specific breadth of attention and resizing the attended region, in UFOV performance. To this end, 135 older adults completed the UFOV and modified Navon tasks to measure their efficiency in maintaining, contracting, and expanding the breadth of attention. We then examined individual-difference associations between these aspects of attentional breadth deployment and UFOV performance. We found that performance on UFOV Subtask 2 was associated with efficient contraction of attentional breadth (i.e., resizing the attended region to a smaller area), while Subtask 3 performance was associated with the efficiency of expanding attentional breadth (i.e., resizing the attended region to a larger area). The selectivity of these relationships appears to implicate these specific deployments of attentional breadth in how people complete the task, as it suggests that these relationships are not simply attributable to shared variance in a broader domain of cognitive functioning. The implications of these results for our understanding of UFOV, as well as future research directions that test the relative contributions of different cognitive processes in predicting task performance, are discussed.

How does street environment affect pedestrian crash risks? A link-level analysis using street view image-based pedestrian exposure measurement

Street space plays a critical role in pedestrian safety, but the influence of fine-scale street environment features has not been sufficiently understood. To analyze the effect of the street environment at the link level, it is essential to account for the spatial variation of pedestrian exposure across street links, which is challenging due to the lack of detailed pedestrian flow data. To address these issues, this study proposes to extract link-level pedestrian exposure from spatially ubiquitous street view images (SVIs) and investigate the impact of fine-scale street environment on pedestrian crash risks, with a particular focus on pedestrian facilities (e.g., crossing and sidewalk design). Both crash frequency and severity are analyzed at the link level, with the latter incorporating two distinct aggregation metrics: maximum severity and medium severity. Using Hong Kong as a case study, the results show that the link-level pedestrian exposure extracted from SVIs can lead to better model fit than alternative zone-level measurements. Specifically, higher pedestrian exposure is found to increase the total pedestrian crash frequency, while reducing the risk of serious injuries or fatalities, confirming the “safety in numbers” effect for pedestrians. Pedestrian facilities are also shown to influence pedestrian crash frequency and severity in different ways. The presence of crosswalks can increase crash frequency, but denser crosswalk design mitigates this effect. In addition, two-side sidewalks can increase crash frequency, while the absence of sidewalks leads to higher risks of crash severity. These findings highlight the importance of fine-scale street environment and pedestrian facility design for pedestrian safety.

Stock price crash risk research: current trends and future directions

PurposeUnderstanding and mitigating stock price crash risk is vital for investors and regulators to ensure financial market stability. This study aims to unveil significant research trends and opportunities.Design/methodology/approachThis study adopts the bibliometric and systematic review approach to analyse 485 Scopus-indexed articles through citation, keyword co-occurrence, bibliographic coupling, and publication analyses and delve into the depth of crash risk literature.FindingsThis bibliometric review reveals not only a surge in crash risk publications over the last decade but also delineates several emerging thematic threads within this domain. We identify seven distinct themes that have gained prominence in recent literature: bad news hoarding, board characteristics, capital market factors, corporate policies, ownership impact, corporate governance, and external environmental influences on crash risk. This thematic analysis provides a comprehensive overview of the evolving landscape of crash risk research and underscores the multifaceted nature of factors contributing to market instability.Practical implicationsThis study makes a substantial contribution by furnishing a thorough examination of existing studies, pinpointing areas where knowledge is lacking, and shedding light on emerging trends and debates within the crash risk literature.Originality/valueThis study identifies current research trajectories and propels future exploration into agency perspectives, audit quality, and corporate disclosures within crash risk literature.