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<p>Faultlines provide a novel theoretical lens for examining entrepreneurial team (ET) dynamics and their implications for firm performance. Drawing on comprehensive data from Chinese listed firms (2010–2023), we find a robust positive association between attribute-based faultline configurations and heightened stock price crash risk. Notably, ET faultlines elevate crash risk through two distinct mechanisms: first, by signaling potential governance weaknesses to capital markets, and second, by impairing internal information flows within the organization. Importantly, we demonstrate that these adverse effects are attenuated by effective internal governance structures and interest alignment mechanisms. These findings extend the theoretical boundaries of principal-agent theory, interest convergence theory, and information asymmetry theory into the domain of team diversity, revealing that ET faultlines can undermine capital market stability. This study offers empirically grounded insights for corporate governance practices aimed at mitigating such destabilizing effects.</p>

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Can “splitting” be deleterious? The impact of entrepreneurial team’s faultlines on stock price crash risk

  • 期刊论文

  • 发表日期：

    2025年8月11日

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  • Jiajun Zhu,
  • Jing Gao,
  • Yilin He

摘要

Faultlines provide a novel theoretical lens for examining entrepreneurial team (ET) dynamics and their implications for firm performance. Drawing on comprehensive data from Chinese listed firms (2010–2023), we find a robust positive association between attribute-based faultline configurations and heightened stock price crash risk. Notably, ET faultlines elevate crash risk through two distinct mechanisms: first, by signaling potential governance weaknesses to capital markets, and second, by impairing internal information flows within the organization. Importantly, we demonstrate that these adverse effects are attenuated by effective internal governance structures and interest alignment mechanisms. These findings extend the theoretical boundaries of principal-agent theory, interest convergence theory, and information asymmetry theory into the domain of team diversity, revealing that ET faultlines can undermine capital market stability. This study offers empirically grounded insights for corporate governance practices aimed at mitigating such destabilizing effects.