Academic Independent Director Resignation and Stock Price Crash Risk: Evidence From China

Academic independent directors typically reduce future stock crash risk by improving the quality of financial reporting, urging corporate social responsibility, discouraging overinvestment, and reducing institutional capital. Accordingly, this paper analyzes the impact of academic independent director resignations on firm-specific stock price crash risk under the influence of Document 18 and Regulation 11 using data from the Chinese stock market from 2008 to 2018. During the research period, the paper further investigates the PSM-DID method and uses the methodology to test the policy effects. Heterogeneity tests show that academic independent directors with a doctorate degree (Ph.D.) and female academic independent directors have a more significant impact on stock price crashes. In contrast, in the overall sample, the relationship between academic director resignations and stock price crashes was concluded to be less significant and passed multiple robust tests. Overall, our findings suggest that some kind of academic independent directors in China provide value to firms and help reduce stock price risk, effectively bridging the limitations of the literature in its development.