Risk disclosure and stock price crash risk: Evidence from Chinese listed firms

This study constructs a risk-related dictionary to quantify firm risk disclosure and explores its association with stock price crash risk. Based on Chinese A-share listed companies from 2013 to 2020, we find that (1) risk disclosure is negatively associated with stock price crash risk; (2) this association is more significant in non-state-owned firms, firms in regions with poor legal systems, and during bull markets; and (3) analyst forecasts and investor sentiment have mediating effects. Evidence shows that mandatory requirements for risk disclosure are meaningful and suggests that regulators improve risk disclosure norms to promote Chinese capital market development.