Employee quality and stock price crash risk

ABSTRACT

Employees are practitioners of firm activities and play an important role in corporate governance, and their quality will affect stock price crash risk. We investigate the effect of employee quality on stock price crash risk. Using a sample of Chinese-listed firms, we find that employee quality has a significant negative influence on stock price crash risk and the effect is only significant in state-owned enterprises and high-tech firms. The findings are robust to an alternative measure of employee quality and controlling for missing variables and endogeneity. We further find that the effect is achieved by improving internal control quality, therefore, internal control plays a mediating role in employee quality and stock price crash risk. Our study provides new empirical evidence for human capital theory of corporate governance, and also provide implications for monitoring stock price crash risk.

KEYWORDS:

• Employee quality
• stock price crash risk
• internal control
• state-owned enterprises

Acknowledgments

We gratefully acknowledge the support of the National Natural Science Foundation of China (Grant No.71302132 and Grant No.71932003), Social Science Key Project of Sichuan Province of China (Grant No. SC17A010), and the research fund of Sichuan University (Grant No. SKQY201650).

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [71302132,71932003]; Social Science Key Project of Sichuan Province of China [SC17A010]; Sichuan University [SKQY201650].