This dissertation enhances the crash-risk literature through three related essays that incorporate insights from international economics, labor economics, and institutional theory to explore how information frictions stemming from trade policy uncertainty, labor investment inefficiency, and institutional distance create a nonlinear crash risk.
In the first essay, a global sample of public firms from 17 countries is examined to assess the effect of trade policy uncertainty (TPU) on crash risk from 2010 to 2023. The results indicate that higher exposure to TPU significantly increases crash risk, aligning with the idea that managers postpone the disclosure of negative trade-related shocks. Notably, this effect depends on the firm’s information and governance structure. Companies operating in poor information environments, characterized by limited analyst coverage, wide bid–ask spreads, and opaque geographic segment disclosures, experience a much stronger TPU–crash risk relationship. Conversely, firms with greater analyst coverage, more transparent geographic disclosures, and stronger governance mechanisms, such as institutional ownership and independent boards, show a significantly reduced response to trade policy uncertainty. These findings highlight disclosure transparency and monitoring as crucial channels through which policy uncertainty is converted into firm-level downside-tail risk.
The second essay broadens crash-risk theory into the operational realm by investigating labor investment inefficiency as a source of hidden downside risks. By analyzing of U.S. firms between 2010 to 2023, this study reveals that deviations from optimal labor investment significantly increase crash risk. Evidence suggests that labor misallocation allows operational losses to accumulate gradually before being suddenly revealed. This relationship is intensified in firms with weak information environments and limited market transparency but is significantly weakened by stronger analyst monitoring and governance mechanisms, indicating that external discipline and internal oversight limit managerial discretion and reduce the incentives for concealing bad news.
The third essay explores how institutional distance affects downside risk in cross-border mergers and acquisitions (M&As). Examining 2,100 international acquisitions completed between 2005 and 2023, this study finds that greater institutional distance, particularly political and regulatory divergence, significantly increases acquirer crash risk. These effects are most pronounced when disclosure environments are weak and market liquidity is low, but are substantially mitigated by strong firm-level governance and high-quality country-level institutions. The results emphasize how institutional misalignment creates information and monitoring friction that facilitates the accumulation of hidden losses during post-acquisition integration.
The three essays collectively enhance the existing literature by broadening the conceptual scope of stock price crash risk. This expansion goes beyond the realm of reporting opacity to include factors such as macroeconomic uncertainty, operational inefficiency and institutional divergence. The essays illustrate that the quality of the information environment and the robustness of governance do not directly mitigate crash risk; they also systematically influence how uncertainty translates into severe negative outcomes. By incorporating international, operational, and institutional aspects into a cohesive framework, this dissertation provides valuable insights for investors, managers, regulators, and policymakers focused on financial stability.

Acharya, V. V., Pedersen, L. H., Philippon, T., & Richardson, M. (2017). Measuring systemic risk. The Review of Financial Studies, 30(1), 2-47.‏
Aguilera, R. V., & Grøgaard, B. (2019). The dubious role of institutions in international business: A road forward. Journal of International Business Studies, 50(1), 20-35.‏
Alpysbayeva, D., & Vanormelingen, S. (2022). Labor market rigidities and misallocation: Evidence from a natural experiment. Labour Economics, 78, 102229.‏
Amihud, Y., & Mendelson, H. (1986). Liquidity and stock returns. Financial Analysts Journal, 42(3), 43-48.‏
An, H., & Zhang, T. (2013). Stock price synchronicity, crash risk, and institutional investors. Journal of Corporate Finance, 21, 1-15.‏
Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. The Quarterly Journal of Economics, 131(4), 1593-1636.‏
Bali, T. G., Subrahmanyam, A., & Wen, Q. (2021). The macroeconomic uncertainty premium in the corporate bond market. Journal of Financial and Quantitative Analysis, 56(5), 1653-1678.‏
Barrot, J. N., & Sauvagnat, J. (2016). Input specificity and the propagation of idiosyncratic shocks in production networks. The Quarterly Journal of Economics, 131(3), 1543-1592.‏
Bebchuk, L., Cohen, A., & Ferrell, A. (2009). What matters in corporate governance?. The Review of Financial Studies, 22(2), 783-827.‏
Belo, F., Lin, X., & Bazdresch, S. (2014). Labor hiring, investment, and stock return predictability in the cross section. Journal of Political Economy, 122(1), 129-177.‏
Ben-Nasr, H., & Alshwer, A. A. (2016). Does stock price informativeness affect labor investment efficiency?. Journal of Corporate Finance, 38, 249-271.‏
Bens, D. A., Berger, P. G., & Monahan, S. J. (2011). Discretionary disclosure in financial reporting: An examination comparing internal firm data to externally reported segment data. The Accounting Review, 86(2), 417-449.‏
Berger, P. G., & Hann, R. (2003). The impact of SFAS No. 131 on information and monitoring. Journal of Accounting Research, 41(2), 163-223.‏
Berry, H., Guillén, M. F., & Zhou, N. (2010). An institutional approach to cross-national distance. Journal of International Business Studies, 41(9), 1460-1480.‏
Biddle, G. C., Hilary, G., & Verdi, R. S. (2009). How does financial reporting quality relate to investment efficiency?. Journal of accounting and economics, 48(2-3), 112-131.‏
Bleck, A., & Liu, X. (2007). Market transparency and the accounting regime. Journal of Accounting Research, 45(2), 229-256.‏
Bloom, N., & Van Reenen, J. (2010). Why do management practices differ across firms and countries?. Journal of Economic Perspectives, 24(1), 203-224.‏
Boehm, C. E., Flaaen, A., & Pandalai-Nayar, N. (2019). Input linkages and the transmission of shocks: Firm-level evidence from the 2011 Tōhoku earthquake. Review of Economics and Statistics, 101(1), 60-75.‏
Botero, J. C., Djankov, S., Porta, R. L., Lopez-de-Silanes, F., & Shleifer, A. (2004). The regulation of labor. The Quarterly Journal of Economics, 119(4), 1339-1382.‏
Brogaard, J., & Detzel, A. (2015). The asset-pricing implications of government economic policy uncertainty. Management Science, 61(1), 3-18.‏
Bushee, B. J. (1998). The influence of institutional investors on myopic R&D investment behavior. Accounting Review, 305-333.‏
Bushman, R. M., & Smith, A. J. (2001). Financial accounting information and corporate governance. Journal of Accounting and Economics, 32(1-3), 237-333.‏
Bushman, R., Chen, Q., Engel, E., & Smith, A. (2004). Financial accounting information, organizational complexity and corporate governance systems. Journal of Accounting and Economics, 37(2), 167-201.‏
Caldara, D., Iacoviello, M., Molligo, P., Prestipino, A., & Raffo, A. (2020). The economic effects of trade policy uncertainty. Journal of Monetary Economics, 109, 38-59.‏
Callen, J. L., & Fang, X. (2013). Institutional investor stability and crash risk: Monitoring versus short-termism?. Journal of Banking & Finance, 37(8), 3047-3063.‏
Callen, J. L., & Fang, X. (2015). Short interest and stock price crash risk. Journal of Banking & Finance, 60, 181-194.‏
Cao, F., Zhang, X., & Yuan, R. (2022). Do geographically nearby major customers mitigate suppliers’ stock price crash risk?. The British accounting review, 54(6), 101118.‏
Casadei, P., & Iammarino, S. (2021). Trade policy shocks in the UK textile and apparel value chain: Firm perceptions of Brexit uncertainty. Journal of International Business Policy, 4(2), 262.‏
Chakrabarti, R., Gupta-Mukherjee, S., & Jayaraman, N. (2009). Mars–Venus marriages: Culture and cross-border M&A. Journal of International Business Studies, 40(2), 216-236.‏
Chen, J., Hong, H., & Stein, J. C. (2001). Forecasting crashes: Trading volume, past returns, and conditional skewness in stock prices. Journal of Financial Economics, 61(3), 345-381.‏
Chowdhury, H., Le, T. H., & Tan, K. J. K. (2025). Organization capital and labor investment efficiency. Journal of Financial Stability, 77, 101384.‏
Contractor, F. J., & Kundu, S. K. (1998). Modal choice in a world of alliances: Analyzing organizational forms in the international hotel sector. Journal of International Business Studies, 29(2), 325-356.‏
Contractor, F. J., Lahiri, S., Elango, B., & Kundu, S. K. (2014). Institutional, cultural and industry related determinants of ownership choices in emerging market FDI acquisitions. International Business Review, 23(5), 931-941.‏
Cuervo-Cazurra, A. (2006). Who cares about corruption?. Journal of International Business Studies, 37(6), 807-822.‏
Dechow, P., Sloan, R., & Sweeney, A. (1995). Detecting earnings management. The Accounting Review.
Eden, L., & Miller, S. R. (2004). Distance matters: Liability of foreignness, institutional distance and ownership strategy. In " Theories of the Multinational Enterprise: Diversity, Complexity and Relevance" (pp. 187-221). Emerald Group Publishing Limited.‏
Edmans, A. (2011). Does the stock market fully value intangibles? Employee satisfaction and equity prices. Journal of Financial economics, 101(3), 621-640.‏
Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. The journal of law and Economics, 26(2), 301-325.‏
Feng, L., Li, Z., & Swenson, D. L. (2017). Trade policy uncertainty and exports: Evidence from China's WTO accession. Journal of International Economics, 106, 20-36.‏
Ferreira, D., Ferreira, M. A., & Raposo, C. C. (2011). Board structure and price informativeness. Journal of Financial economics, 99(3), 523-545.‏
Ferreira, M. A., & Matos, P. (2008). The colors of investors’ money: The role of institutional investors around the world. Journal of Financial Economics, 88(3), 499-533.‏
Gaur, A. S., & Lu, J. W. (2007). Ownership strategies and survival of foreign subsidiaries: Impacts of institutional distance and experience. Journal of Management, 33(1), 84-110.‏
Ghaly, M., Anh Dang, V., & Stathopoulos, K. (2017). Cash holdings and labor heterogeneity: The role of skilled labor. The Review of Financial Studies, 30(10), 3636-3668.‏
Ghaly, M., Dang, V. A., & Stathopoulos, K. (2020). Institutional investors' horizons and corporate employment decisions. Journal of Corporate Finance, 64, 101634.‏
Giroud, X., & Mueller, H. M. (2010). Does corporate governance matter in competitive industries?. Journal of Financial Economics, 95(3), 312-331.‏
Glosten, L. R., & Milgrom, P. (1985). Bid, ask, and transaction prices in a specialist.‏
Gulen, H., & Ion, M. (2016). Policy uncertainty and corporate investment. The Review of Financial Studies, 29(3), 523-564.‏
Habib, A., Costa, M. D., Huang, H. J., Bhuiyan, M. B. U., & Sun, L. (2020). Determinants and consequences of financial distress: review of the empirical literature. Accounting & Finance, 60, 1023-1075.‏
Handley, K., & Limão, N. (2017). Policy uncertainty, trade, and welfare: Theory and evidence for China and the United States. American Economic Review, 107(9), 2731-2783.‏
Hart, O. D. (1983). The market mechanism as an incentive scheme. The Bell Journal of Economics, 366-382.‏
Hassan, T. A., Hollander, S., Van Lent, L., & Tahoun, A. (2019). Firm-level political risk: Measurement and effects. The Quarterly Journal of Economics, 134(4), 2135-2202.‏
He, F., Lucey, B., & Wang, Z. (2021). Trade policy uncertainty and its impact on the stock market-evidence from China-US trade conflict. Finance Research Letters, 40, 101753.‏
Healy, P. M., & Palepu, K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of Accounting and Economics, 31(1-3), 405-440.‏
Henisz, W. J. (2000). The institutional environment for economic growth. Economics & Politics, 12(1), 1-31.‏
Hennart, J.-F. (2009). Down with MNE-centric theory! Market entry and expansion as the bundling of MNE and local assets. Journal of International Business Studies, 40(9), 1432-1454.
Hermalin, B. E., & Weisbach, M. S. (2012). Information disclosure and corporate governance. The journal of finance, 67(1), 195-233.‏
Hernández, V., Nieto, M. J., & Boellis, A. (2018). The asymmetric effect of institutional distance on international location: Family versus nonfamily firms. Global Strategy Journal, 8(1), 22-45.‏
Hoberg, G., & Moon, S. K. (2017). Offshore activities and financial vs operational hedging. Journal of Financial Economics, 125(2), 217-244.‏
Hong, H., & Stein, J. C. (2003). Differences of opinion, short-sales constraints, and market crashes. The Review of Financial Studies, 16(2), 487-525.‏
Hope, O. K., Kang, T., Thomas, W. B., & Vasvari, F. (2009). The effects of SFAS 131 geographic segment disclosures by US multinational companies on the valuation of foreign earnings. Journal of International Business Studies, 40(3), 421-443.‏
Hope, O. K., Thomas, W. B., & Vyas, D. (2013). Financial reporting quality of US private and public firms. The Accounting Review, 88(5), 1715-1742.‏
Hutton, A. P., Marcus, A. J., & Tehranian, H. (2009). Opaque financial reports, R2, and crash risk. Journal of Financial Economics, 94(1), 67-86.‏
Hymer, S. H. (1960). The international operations of national firms, a study of direct foreign investment (Doctoral dissertation, Massachusetts Institute of Technology).‏
Jin, L., & Myers, S. C. (2006). R2 around the world: New theory and new tests. Journal of financial Economics, 79(2), 257-292.‏
Johanson, J., & Vahlne, J.-E. (1977). The internationalization process of the firm. Journal of International Business Studies, 8: 23–32.
Jung, B., Lee, W. J., & Weber, D. P. (2014). Financial reporting quality and labor investment efficiency. Contemporary Accounting Research, 31(4), 1047-1076.‏
Kaufmann, D., Kraay, A., & Mastruzzi, M. (2010). Response to ‘What do the worldwide governance indicators measure?’. The European Journal of Development Research, 22(1), 55-58.‏
Kim, J. B., & Zhang, L. (2016). Accounting conservatism and stock price crash risk: Firm‐level evidence. Contemporary Accounting Research, 33(1), 412-441.‏
Kim, J. B., Li, Y., & Zhang, L. (2011a). Corporate tax avoidance and stock price crash risk: Firm-level analysis. Journal of Financial Economics, 100(3), 639-662.‏
Kim, J. B., Li, Y., & Zhang, L. (2011b). CFOs versus CEOs: Equity incentives and crashes. Journal of Financial Economics, 101(3), 713-730.‏
Kogut, B., & Singh, H. (1988). The effect of national culture on the choice of entry mode. Journal of International Business Studies, 19(3), 411-432.‏
Kostova, T. (1999). Transnational transfer of strategic organizational practices: A contextual perspective. Academy of management review, 24(2), 308-324.‏
Kostova, T., & Zaheer, S. (1999). Organizational legitimacy under conditions of complexity: The case of the multinational enterprise. Academy of Management Review, 24(1), 64-81.‏
Laeven, L., & Levine, R. (2008). Complex ownership structures and corporate valuations. The Review of Financial Studies, 21(2), 579-604.‏
Lang, L., Ofek, E., & Stulz, R. (1996). Leverage, investment, and firm growth. Journal of Financial Economics, 40(1), 3-29.‏
Lang, M. H., & Lundholm, R. J. (1996). Corporate disclosure policy and analyst behavior. Accounting review, 467-492.‏
Lang, M. H., Lins, K. V., & Miller, D. P. (2003). ADRs, analysts, and accuracy: Does cross listing in the United States improve a firm's information environment and increase market value?. Journal of accounting research, 41(2), 317-345.‏
Lazear, E. P. (1990). Job security provisions and employment. The Quarterly Journal of Economics, 105(3), 699-726.‏
Le, A. T., & Tran, T. P. (2022). Corporate governance and labor investment efficiency: International evidence from board reforms. Corporate Governance: An International Review, 30(5), 555-583.‏
Lei, A. C., & Song, C. (2022). Economic policy uncertainty and stock market activity: Evidence from China. Global Finance Journal, 52, 100581.‏
Li, G., Fujiyama, K., Wu, C., & Zheng, Y. (2024). Employment protection, corporate governance, and labor productivity around the World. Journal of International Financial Markets, Institutions and Money, 92, 101978.‏
Li, W., & Cai, G. (2016). Religion and stock price crash risk: Evidence from China. China Journal of Accounting Research, 9(3), 235-250.‏
Ling, Z., Rasheed, M. S., Kouser, S., & Mohd Nordin, N. (2025). Stock price crash risk in emerging markets: the role of corporate governance and price informativeness/Ling Zhang...[et al.]. Asia-Pacific Management Accounting Journal (APMAJ), 20(1), 59-83.‏
Lins, K. V., Servaes, H., & Tamayo, A. (2017). Social capital, trust, and firm performance: The value of corporate social responsibility during the financial crisis. the Journal of Finance, 72(4), 1785-1824.‏
Liu, T., Guan, X., Wei, Y., Xue, S., & Xu, L. (2023). Impact of economic policy uncertainty on the volatility of China's emission trading scheme pilots. Energy Economics, 121, 106626.‏
Meckling, W. H., & Jensen, M. C. (1976). Theory of the Firm. Managerial Behavior, Agency Costs and Ownership Structure, 3(4), 305-360.‏
Meyer, K. E., & Nguyen, H. V. (2005). Foreign investment strategies and sub‐national institutions in emerging markets: Evidence from Vietnam. Journal of Management Studies, 42(1), 63-93.‏
Meyer, K. E., & Peng, M. W. (2016). Theoretical foundations of emerging economy business research. Journal of international business studies, 47(1), 3-22.‏
North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge University Press.‏
Pastor, L., & Veronesi, P. (2012). Uncertainty about government policy and stock prices. The journal of Finance, 67(4), 1219-1264.‏
Pinnuck, M., & Lillis, A. M. (2007). Profits versus losses: Does reporting an accounting loss act as a heuristic trigger to exercise the abandonment option and divest employees?. The Accounting Review, 82(4), 1031-1053.‏
Porta, R. L., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. W. (1998). Law and finance. Journal of Political Economy, 106(6), 1113-1155.‏
Porter, M. E. (1980). Industry structure and competitive strategy: Keys to profitability. Financial Analysts Journal, 36(4), 30-41.‏
Ren, X., Zhong, Y., & Gozgor, G. (2022). The impact of trade policy uncertainty on stock price crash risk of listed tourism companies: Evidence from China. Journal of Policy Research in Tourism, Leisure and Events, 1-21.‏
Rodrigue, J., Shi, Q., & Tan, Y. (2024). Trade policy uncertainty & resource misallocation. European Economic Review, 164, 104720.‏
Rossi, S., & Volpin, P. F. (2004). Cross-country determinants of mergers and acquisitions. Journal of Financial Economics, 74(2), 277-304.‏
Shenkar, O., Tallman, S. B., Wang, H., & Wu, J. (2022). National culture and international business: A path forward. Journal of International Business Studies, 53(3), 516-533.‏
Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The Journal of Finance, 52(2), 737-783.‏
Simintzi, E., Vig, V., & Volpin, P. (2015). Labor protection and leverage. The Review of Financial Studies, 28(2), 561-591.‏
Staiger, D., Stock, J. H., & Watson, M. W. (1997). The NAIRU, unemployment and monetary policy. Journal of economic perspectives, 11(1), 33-49.‏
Wadhwa, K., & Goodell, J. W. (2024). Political uncertainty and stock price crash risk: Insights from state-elections in an emerging market. International Review of Financial Analysis, 95, 103419.‏
Williamson, O. E. (1963). Managerial discretion and business behavior. The American Economic Review, 53(5), 1032-1057.‏
Williamson, O. E. (1985). Reflections on the new institutional economics. Zeitschrift für die gesamte Staatswissenschaft/Journal of Institutional and Theoretical Economics, (H. 1), 187-195.‏
Xu, D., & Shenkar, O. (2002). Note: Institutional distance and the multinational enterprise. Academy of Management Review, 27(4), 608-618.‏
Xu, N., Jiang, X., Chan, K. C., & Wu, S. (2017). Analyst herding and stock price crash risk: Evidence from China. Journal of International Financial Management & Accounting, 28(3), 308-348.‏
Xu, Y., Wang, J., Chen, Z., & Liang, C. (2021). Economic policy uncertainty and stock market returns: New evidence. The North American journal of economics and finance, 58, 101525.‏
Yu, F. F. (2008). Analyst coverage and earnings management. Journal of financial economics, 88(2), 245-271.‏
Zaheer, S. (1995). Overcoming the liability of foreignness. Academy of Management Journal, 38(2), 341-363.‏
Zhou, F., & Wen, H. (2022). Trade policy uncertainty, development strategy, and export behavior: Evidence from listed industrial companies in China. Journal of Asian Economics, 82, 101528.‏
Zhou, K. Z., Xie, E., & Li, J. J. (2021). Organizational resilience to supply chain disruptions: Evidence from the global financial crisis. Journal of International Business Studies, 52(6), 906–924.