Can Public Data Availability Affect Stock Price Crash Risk? Evidence from China

Exploiting the staggered establishment of public data open platforms (PDOPs) across different cities of China, we study whether and how improved public data availability affects firms’ stock price crash risk (SPCR). We find that the establishment of PDOPs significantly decrease local firms’ SPCR. Our results remain valid after various robustness tests, such as placebo tests, instrument variable analysis, entropy balancing analysis, alternative measures of SPCR, as well as alternative difference-in-differences (DID) estimators. Furthermore, additional evidence suggests that the observed effects are driven by two mechanisms: improved operating performance and enhanced external monitoring. The former mechanism reduces the generation of bad news within firms, while the latter restricts managers’ ability to hoard bad news. Overall, our findings suggest that government can help improve capital market resource allocation efficiency by supplying public data to individuals and organizations