Impact of Managerial Entrenchment and Organizational Management Practices on Stock Price Crash Risk: Moderating role of Corporate Social Responsibility

Abstract

Examining stock price crash risk in emerging economies is important due to huge volatility and of weak corporate structure. This study assesses the impact of managerial entrenchment on stock price crash risk and investigates the factors which influence the stock price crash risk of emerging firms, employs the agency framework, and explores the condition which moderates the relation between managerial entrenchment and stock price crash risk by using a moderating variable corporate social responsibility. Concentrating on the extensive BRIC sample for the period of 2010 to 2018, this study finds that the managerial entrenchment significantly increases the stock price crash risk of emerging firms. Further, this study finds that corporate social responsibility weakens the said relationship. This study argues that entrenched managers use CSR for legitimacy purpose and to gain support from key stakeholders. Therefore, this study highlights pivotal managerial and practical implications.