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Do bankers on the board reduce crash risk?
Author(s) -
Kang Min Jung,
Kim Y. Han Andy,
Liao Qunfeng
Publication year - 2020
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/eufm.12241
Subject(s) - crash , business , stock price , shareholder , actuarial science , propensity score matching , stock (firearms) , risk management , matching (statistics) , finance , corporate governance , engineering , computer science , mechanical engineering , paleontology , statistics , mathematics , series (stratigraphy) , biology , programming language
Commercial banker‐directors (CBDs) bring both financial expertise in risk management and conflicts of interest between shareholders and debtholders. The burgeoning literature on stock price crash risk generates important questions of whether CBDs reduce crash risk. Using BoardEx data from 1999 to 2009, we find supporting evidence that the firms with CBDs experience lower stock price crash risk. Moreover, the reduction of crash risk is more pronounced for high‐risk firms under the monitoring of affiliated banker‐directors. The results of this study are robust to the Heckman selection model, propensity score matching, and alternative measures of crash risk.