Does Performance Aspiration Gap Affect Stock Price Crash Risk?

Abstract

Abstract: Using a corporate-level dataset of Chinese listed companies over the period of 2005-2016, this paper studies the effect of performance aspiration gap on stock price crash risk and the moderate effect of marketization and political connection. The results show that: when the actual performance is below aspiration level, the aspiration gap will prompt managers to take risky behaviors and information manipulation behaviors, which will increase the stock price crash risk. In the two types of risky behaviors, the effect of aspiration gap on stock price crash through illegal risky behaviors is greater. The impact of aspiration loss on stock price crash risk is affected by the degree of marketization and political connection. Marketization and political connection negatively moderate the association between aspiration loss and stock price crash risk. When the actual performance is above aspiration level, managers are not motivated to adopt or evade the risk-taking behaviors. The aspiration surplus has no significant impact on stock price crash risk.

Key words: stock price crash risk, performance aspiration, political connection, marketization

Su Kun. Does Performance Aspiration Gap Affect Stock Price Crash Risk?[J]. Management Review, 2022, 34(10): 37-51.

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