Corporate Accessibility and Stock Price Crash Risk

Abstract

We examine whether corporate accessibility to outside market participants can mitigate stock price crash risk in a weak public information environment. We measure accessibility by assessing whether outside investors can assess and communicate with firms via public communication channels (e.g., telephone, email, and online forums) in China. We find that accessible firms have a lower stock price crash risk than inaccessible firms, and that this effect increases with firms’ geographic distance to the country’s financial centers. Further analysis reveals that such effects are related to the role of accessibility in facilitating information gleaning and the arrangement of private meetings between firms and outside investors. Finally, our findings suggest that accessible firms accumulate less negative corporate news than inaccessible firms.

Keywords: Corporate accessibility, Communications, Information acquisition, Stock price crash risk, China

JEL Classification: G19, D89