How Does Management Respond to Stock Price Crashes?

The catalysts of stock price crashes are well documented, but much less is known about what happens following crashes. We consider how managers respond to stock price crashes. Management becomes more focused on improving transparency, raising investment efficiency, reducing agency conflicts, and regaining the trust of stakeholders by investing in social capital and employee welfare. These actions result in the increase in firm value. We also find evidence that management undertake these actions out of concern for their own tenure of employment