Busy Directors,Media Attention And Stock Price Crash Risk

As the volume of China's stock market continues to expand,the volatility of stock prices also increased significantly.Over the past 30 years,China's stock market has experienced many "ups and downs",especially the sharp decline of stock prices.As the most direct risk bearer of individual stock crash,listed companies need to take measures to reduce or transfer the risk of stock price crash to protect their own economic interests.As an extreme phenomenon in the capital market,stock price crash also seriously damages the interests of investors and greatly threatens the stability of China's capital market and the sustainable and healthy development of the national economy.Therefore,it is of positive practical significance to study the formation mechanism of stock price crash risk in depth.The existing literature on the causes of stock price crash risk generally focuses on the board of directors,management and their decision-making,shareholders and other factors of the company rather than external factors such as investor sentiment and market environment,indicating that stock crash risk mainly comes from inside the company.Jin and Myers(2006)put forward the "management information hiding hypothesis",which explained the formation mechanism of stock price crash risk from the level of individual stocks.This hypothesis believes that management's self-interested behavior of hiding "bad news" is an important factor for stock price crash.This hypothesis believed that the self-interest behavior of the management to hide "bad news" was an important factor for stock price crash.Starting from the hypothesis,this paper focuses on the directors who have supervisory obligations to the management,and explores the influence of the busy directors on the stock price crash risk.On the basis of theoretical analysis and literature review,this paper proposes the principal effect hypothesis based on Principal-agent theory,Incomplete contract theory,Resource dependence theory,Busy hypothesis and Reputation hypothesis.Based on Information asymmetry theory,Effective supervision hypothesis of media attention and Market pressure hypothesis,the moderating effect hypothesis of media attention is proposed.Choosing A-share listed companies from 2014 to 2019 as research samples,this paper select “Negative Coefficient of Skewness”(NCSKEW)and “Down-to-up Volatility”(DUVOL)to measure stock price crash risk,choose“The number of concurrent positions held by each director”(DSMEAN)and “The Percentage of busy directors”(DSFMRATIO)to measure how busy the directors are.In addition,this paper select “Annual standardized amount of online financial media coverage”(MA)to measure media attention.Stata15.0 was used to control for both annual and industry fixed effects to test the proposed research hypothesis.The empirical results show that,firstly,due to the dual influence of "Busy Hypothesis" and "Reputation Hypothesis",the director business and the risk of stock price crash show a nonlinear inverted U-shaped relationship.Relatively less busy directors increases the risk of stock price crash as they get busier,while relatively more busy director may bring negative effect of stock price crash.When the directors only serve as directors outside the country,the inverted U-shaped relationship still holds.There is a significant positive relationship between the busyness of independent directors and the risk of stock price crash,but the inverted U-shaped relationship is not significant,that is,the busyness of independent directors will increase the risk of stock price crash.Second,media attention significantly moderates the inverted U-shaped relationship between busy directors and the risk of stock price collapse.The specific modality of moderating effect is as follows: firstly,media attention enhances the reputation effect of concurrent directorship,weakens the busyness effect to a certain extent,and makes the inverted U-shaped curve steeper.Secondly,the reputation incentive of media attention and the increase of social tolerance to directors' concurrent duties brought about by media attention make directors of listed companies have the motivation and conditions to take more external posts,that is,the adjustment of media attention also makes the inflection point of directors' busy life and the risk of stock price crash shift to the right.Finally,the regulation of media attention and did not change overall level of stock price crash risk,the role of the media attention to the degree of busy director is a two-way,low quality director based on the market pressure from media attention more due diligence,also under the influence of media attention reputation incentive initiative to ascend in their own busy,directors are motivated by the higher reputation,high quality but the incentive is diminishing marginal effect.Compared with the existing research,the possible novelty of the text is reflected in the aspects of topic selection and research perspective.At present,there are two kinds of views on the corporate governance effect of directors' busyness: the Busyness hypothesis and the Reputation hypothesis.Most of the existing studies to verify these two kinds of hypotheses are based on the busyness behavior of independent directors,and when measuring the busyness of independent directors,they only examine the concurrent status of independent directors in listed companies.There are still some gaps in the study on the corporate governance effect of full types of directors' busy behavior,and few literatures examine the stock price crash risk from the perspective of full types of directors' busy behavior.Therefore,the research results of this paper are beneficial to enrich the content of corporate governance effect of busy directors,fill in the omission of previous scholars in the research of factors affecting the risk of stock price crash,and have a certain theoretical significance.