Individualistic cultures and crash risk

摘要

This study examines whether individualistic national culture is associated with stock price crash risk ('crash risk') for a sample of firms from 36 countries over the period of 1990-2015. We find robust evidence that firms in more individualistic cultural settings exhibit higher future crash risk. Digging deeper, we find that earnings management, excessive managerial risk-taking, and investors' difference of opinion and overconfidence are all possible explanations for the positive effect of individualism on crash risk. Overall, our findings suggest that individualism, as a key cultural dimension, has an important impact on investor welfare, manifested through crash risk.