Ultimate government control and stock price crash risk: Evidence from China

Using data of Chinese firms over 2004-2018, we find that firms controlled by government en-tities, particularly central government entities, are less prone to stock price crashes, as compared with privately controlled firms. The effect is robust to alternative estimation approaches and moderated by the Split-share Structure Reform and the anti-corruption campaign. The results attest to the incentive alignment view that controlling and minority shareholders align their in-terests and stock prices perform well. Further, we find that government-controlled firms exhibit less financial opacity, undertake less risky investments, and appoint myopic CEOs, through which stock price crash risk is diminished.