From Boardroom to Digital Transformation: Examining the Governance Stock Price Crash Risk NexusFrom Boardroom to Digital Transformation: Examining the Governance Stock Price Crash Risk Nexus
DOI:
https://doi.org/10.62843/jrsr/v.ii.245Keywords:
Corporate Governance, Stock Price Crash Risk, Corporate Digitalization, Board Structure, Ownership Structure, Technological Expertise, NCSKEW, DUVOL, Pakistan Stock ExchangeAbstract
The study analyzes the effect of corporate governance on stock price crash risk, with special attention to the mediating role of corporate digitalization in non-financial firms listed on the Pakistan Stock Exchange (PSX). Based on agency theory and information asymmetry approaches, the study examines whether good corporate governance reduces management opportunism, information asymmetry, and stock price crash risk. Corporate governance is considered from three major perspectives: board structure, ownership structure, and technological competence of the board. Principal Component Analysis (PCA) is used to construct a corporate governance index reflecting its multidimensionality. Corporate digitalization is examined as a mediator through which corporate governance influences stock price crash risk. Using panel data from 35 non-financial firms included in the KSE-100 Index during 2015–2025, the study employs two measures of stock price crash risk: negative conditional skewness (NCSKEW) and down-to-up volatility (DUVOL). The proposed theoretical framework examines the effect of corporate governance on stock price crash risk, its effect on corporate digitalization, the effect of digitalization on crash risk, and the indirect effect of governance through digitalization. By integrating traditional corporate governance measures with technological competence and corporate digitalization, the study contributes to the existing literature on corporate governance and stock price crash risk in emerging markets. Furthermore, it highlights how technology-based corporate governance can enhance corporate transparency, improve information environments, reduce information asymmetry, and potentially mitigate stock price crash risk among non-financial firms operating in emerging economies such as Pakistan.
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