Do foreign investors affect stock price crash risk in the Korean stock market?
by Sang Koo Kang; Haksoon Kim; Hyunil Lim
International Journal of Banking, Accounting and Finance (IJBAAF), Vol. 13, No. 4, 2023

Abstract: We examine the relationship between short-selling activity and stock price crash risk in the Korean stock market. We find a positive relationship between short-selling and stock price crash risk. This result is consistent with prior literature on short-selling activity and stock price crash risk. Furthermore, the positive relationship is more pronounced when a firm is more likely to attract bad news or when more informed traders, specifically foreign investors, are present in the market. The contribution of this paper's results is that the role of foreign investors as informed traders and their effect on stock price crash risk is deemed significant in the Korean stock market.

Online publication date: Thu, 05-Oct-2023

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