Corporate diversification, board diversity and stock-price crash risk: Evidence from publicly listed firms in Malaysia
This study investigates whether corporate diversification can be a predictability variable contender for future stock-price crash risk. Using a sample of Malaysian firms based on 2010-2015 data, our study shows evidence of the mitigating effect of diversification on crash risk, consistent with the t...
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| Format: | Article |
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Universiti Putra Malaysia
2019
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| Online Access: | http://eprints.sunway.edu.my/1407/ |
| _version_ | 1848802051177316352 |
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| author | Lee, Kian Tek * Hooy, Chee Wooi Ooi, Chai Aun |
| author_facet | Lee, Kian Tek * Hooy, Chee Wooi Ooi, Chai Aun |
| author_sort | Lee, Kian Tek * |
| building | SU Institutional Repository |
| collection | Online Access |
| description | This study investigates whether corporate diversification can be a predictability variable contender for future stock-price crash risk. Using a sample of Malaysian firms based on 2010-2015 data, our study shows evidence of the mitigating effect of diversification on crash risk, consistent with the theory of coinsurance effect. However, our further analysis shows that the mitigating effect of diversification on crash risk is only evident on highly
diversified firms but not on firms of low to moderate degree of diversification. This finding is aligned with the dominant view of the existence of crash risk following the
managerial bad-news hoarding model. Furthermore, our study finds that the mitigating effect of diversification is more pronounced for firms with board diversity in gender which
is in support of the notion of board diversity in promoting corporate governance. Our findings are useful to firms (and shareholders) who want to manage “tail risk” in stock
prices and to investors who want to incorporate crash risk as parts of their portfolio and risk management decisions. |
| first_indexed | 2025-11-14T21:17:12Z |
| format | Article |
| id | sunway-1407 |
| institution | Sunway University |
| institution_category | Local University |
| last_indexed | 2025-11-14T21:17:12Z |
| publishDate | 2019 |
| publisher | Universiti Putra Malaysia |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | sunway-14072020-10-01T07:11:32Z http://eprints.sunway.edu.my/1407/ Corporate diversification, board diversity and stock-price crash risk: Evidence from publicly listed firms in Malaysia Lee, Kian Tek * Hooy, Chee Wooi Ooi, Chai Aun HF Commerce This study investigates whether corporate diversification can be a predictability variable contender for future stock-price crash risk. Using a sample of Malaysian firms based on 2010-2015 data, our study shows evidence of the mitigating effect of diversification on crash risk, consistent with the theory of coinsurance effect. However, our further analysis shows that the mitigating effect of diversification on crash risk is only evident on highly diversified firms but not on firms of low to moderate degree of diversification. This finding is aligned with the dominant view of the existence of crash risk following the managerial bad-news hoarding model. Furthermore, our study finds that the mitigating effect of diversification is more pronounced for firms with board diversity in gender which is in support of the notion of board diversity in promoting corporate governance. Our findings are useful to firms (and shareholders) who want to manage “tail risk” in stock prices and to investors who want to incorporate crash risk as parts of their portfolio and risk management decisions. Universiti Putra Malaysia 2019 Article PeerReviewed Lee, Kian Tek * and Hooy, Chee Wooi and Ooi, Chai Aun (2019) Corporate diversification, board diversity and stock-price crash risk: Evidence from publicly listed firms in Malaysia. International Journal of Economics and Management (IJEM), 13 (2). pp. 273-289. ISSN 2600-9390 http://www.ijem.upm.edu.my/vol13no2.htm |
| spellingShingle | HF Commerce Lee, Kian Tek * Hooy, Chee Wooi Ooi, Chai Aun Corporate diversification, board diversity and stock-price crash risk: Evidence from publicly listed firms in Malaysia |
| title | Corporate diversification, board diversity and stock-price crash risk: Evidence from publicly listed firms in Malaysia |
| title_full | Corporate diversification, board diversity and stock-price crash risk: Evidence from publicly listed firms in Malaysia |
| title_fullStr | Corporate diversification, board diversity and stock-price crash risk: Evidence from publicly listed firms in Malaysia |
| title_full_unstemmed | Corporate diversification, board diversity and stock-price crash risk: Evidence from publicly listed firms in Malaysia |
| title_short | Corporate diversification, board diversity and stock-price crash risk: Evidence from publicly listed firms in Malaysia |
| title_sort | corporate diversification, board diversity and stock-price crash risk: evidence from publicly listed firms in malaysia |
| topic | HF Commerce |
| url | http://eprints.sunway.edu.my/1407/ http://eprints.sunway.edu.my/1407/ |