Investor protection and stock price crash risk in Asian economies: the moderating roles of corporate governance and firm age

Purpose: This study aims to examine the moderating impact of firm age and corporate governance on the relationship between investor protection (IP) and stock price crash risk (SPCR) in Asian economies. Design/methodology/approach: The study utilized annual data from 432 publicly traded nonfinancial firms from six Asian economies: China, Hong Kong, India, Japan, Pakistan and Singapore. The study period spanned 16 years, from 2007 to 2022. The sample was divided into three categories, including the overall sample and developing and developed economy subgroups. The hypotheses were tested using a generalized least squares panel regression approach. Findings: The results suggest that corporate governance and firm age negatively moderate the relationship between IP and SPCR in Asian economies, revealing that firms with better corporate governance practices and older firms may experience a more pronounced reduction in SPCR. Firms in developing Asian economies that adopt stronger governance standards are more effective in reducing the likelihood of substantial declines in stock prices than those in developed Asian economies. Originality/value: This study makes multiple contributions to the existing body of literature. To the best of the authors’ knowledge, this is the first attempt to examine the moderating impact of firm age and corporate governance on the relationship between IP and stock price crash risk in Asia. While prior research has primarily focused on either the direct impact of IP or corporate governance on stock price behavior, this study integrates firm age and corporate governance factors as moderators, shedding light on their joint effects on mitigating SPCR. This is likely one of the first studies by a research team in Asia that compares the nonfinancial markets of developed and developing Asian countries.