DOES INFORMATION ASYMMETRY MATTER IN THE RELATIONSHIP OF CORPORATE GOVERNANCE AND STOCK PRICE CRASH RISK

Abstract

The purpose of this study is to investigate the relationship of corporate governance and stock price crash risk in emerging economies. The study also investigates the mediating role of information asymmetry. The data was collected from non-financial firms of China, India and Pakistan. The data was collected from 2011 to 2023. To measure the stock price crash risk (SPCR), this study uses two proxies (NSKEW and DUVOL). These data were collected from data stream and annual statement of the firms. The results are consistent throughout the countries: strong corporate governance is associated with lower SPCR, the effects operate mainly through the reduction of information asymmetry. findings show that corporate governance significantly reduces information asymmetry which reduces SPCR. The study contributes to the literature in such a way that it will give insights to regulators, investors, researchers and creditors.