Large shareholders' tunneling and stock price crash risk

Tunnelling by large shareholders is a problem representative of ownership concentration. Large shareholders may interfere with a firm's information disclosure to support their tunnelling behaviour, causing a high stock price crash risk. Using listed companies in China from 2001 to 2019 as a sample, we find that more severe tunnelling can lead to a higher risk of stock price crashes. Moreover, we investigate potential factors such as internal control, operational performance, and split-share reforms, that may affect the aforementioned relationship. A high level of internal control and good operational performance will weaken the relationship, and the relationship is stronger before split-share reforms. The findings of this study contribute to a better understanding of the relationship given China's institutional background and better investor protection.