Stock price crash risk and cost of equity capital

Abstract

This paper studied the impact of stock price crash risk on the cost of equity capital by taking a-share listed companies in Shanghai and Shenzhen stock exchanges from 2013 to 2017 as samples. The empirical test results show that the increase of the risk of stock price crash will lead to the increase of the cost of equity capital. Further empirical test is made on the impact of major shareholders' shareholding on the relationship between stock price crash risk and equity capital cost. The empirical results show that major shareholders' shareholding will inhibit managers' selective disclosure of information and alleviate information asymmetry, thus weakening the relationship between stock price crash risk and equity capital cost.