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<p>This paper investigates whether dividend smoothing will exacerbate firms’ bad news hoarding and increase their future stock price crash risk. By employing a large sample from 30 economies during the period 1987–2018, we find that dividend smoothing amplifies firms’ crash risk. This effect is robust after addressing potential endogeneity issues, using stricter fixed effects models, difference-in-differences estimation, and two-stage least squares regressions. We find that dividend smoothing amplifies future crash risk because it increases the level of information asymmetry between managers and investors. In addition, this effect is more pronounced in economies with weaker shareholder protection or lower institutional quality.</p>

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Does dividend smoothing also smooth-out bad news release? Evidence from stock price crash risk

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2026年1月24日

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  • Yongda Liu,
  • Chao Yin

摘要

This paper investigates whether dividend smoothing will exacerbate firms’ bad news hoarding and increase their future stock price crash risk. By employing a large sample from 30 economies during the period 1987–2018, we find that dividend smoothing amplifies firms’ crash risk. This effect is robust after addressing potential endogeneity issues, using stricter fixed effects models, difference-in-differences estimation, and two-stage least squares regressions. We find that dividend smoothing amplifies future crash risk because it increases the level of information asymmetry between managers and investors. In addition, this effect is more pronounced in economies with weaker shareholder protection or lower institutional quality.