Scholarlink

<p>This study examines the impact of bank undercapitalization—stemming from the Reserve Bank of India’s Asset Quality Review (AQR)—on the stock price crash risk of borrowing firms. We argue that the capital erosion induced by the AQR weakened banks’ monitoring incentives, thereby increasing the likelihood that managers engage in bad-news hoarding, which ultimately elevates firm-specific stock price crash risk. This effect is particularly pronounced for firms with higher default risk. Importantly, we find that external monitoring, especially auditor scrutiny, moderates this relationship by constraining managerial opportunism. Taken together, our findings suggest that while the AQR was designed to restore the health of the banking sector, it inadvertently heightened downside equity risk for firms reliant on capital-constrained banks.</p>

错误：搜索内容不能为空，请输入英文关键词
错误：关键词超出字数限制，请精简
高级检索

Bank monitoring incentives and stock price crash risk: evidence from an exogenous bank capital shock

  • 期刊论文

  • 发表日期：

    2025年12月17日

查看全文
  • Prateek Nahar,
  • MVK Jagannath,
  • Yogesh Chauhan

摘要

This study examines the impact of bank undercapitalization—stemming from the Reserve Bank of India’s Asset Quality Review (AQR)—on the stock price crash risk of borrowing firms. We argue that the capital erosion induced by the AQR weakened banks’ monitoring incentives, thereby increasing the likelihood that managers engage in bad-news hoarding, which ultimately elevates firm-specific stock price crash risk. This effect is particularly pronounced for firms with higher default risk. Importantly, we find that external monitoring, especially auditor scrutiny, moderates this relationship by constraining managerial opportunism. Taken together, our findings suggest that while the AQR was designed to restore the health of the banking sector, it inadvertently heightened downside equity risk for firms reliant on capital-constrained banks.