The influence of lazy information disclosure on stock price crash risk - a specification curve analysis

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2024-06-27
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en
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This thesis uses the Specification Curve Analysis (SCA) methodology to assess the effect of lazy information disclosure on stock price crash risk. Given that the annual report is the primary means of communicating information, it has the most potential to mitigate information asymmetry between investors and firms. Data from the study of Shi et al. (2023) is used, consisting of text similarity scores of annual reports and stock price crash risk measured by looking at the negative skewness (NCSKEW) and down-to-up volatility (DUVOL) of the returns of 1,472 Chinese companies. SCA allows to look at the association between several outcomes of a relationship, considering different treatments, models, and variables. The results from the eight SCA models show that the predicted relationship is extremely dependent on the specification of the lag structure and proxy of the independent variable text similarity. Additionally, it provides evidence of the potential redundancy of certain control variables used in stock price crash risk literature, as these control variables are shown to have little effect on the estimated relationship. It contributes to the literature by promoting transparency in financial research through SCA and providing valuable information for the stock price crash literature. Keywords: Specification Curve Analysis (SCA), Stock Price Crash Risk, Lazy Information Disclosure, Annual Report, Model Specification
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Faculteit der Managementwetenschappen