The board diversity (relation-oriented and task-oriented) and the stock price crash risk: Emphasizing the role of institutional ownership

Subject Areas : Journal of Capital Market Analysis

Soleyman Karimi Shehni ¹ , Allah Karam Salehi ^{2 *} , Mousa Bagheri Kahkesh ³ , Samira Hashemi Bolmiri ⁴

1 - Department of Accounting, Masjed-Soleiman Branch, Islamic Azad University, Masjed-Soleiman, Iran.
2 - Department of Accounting, Masjed-Soleiman Branch, Islamic Azad University, Masjed-Soleiman, Iran
3 - Department of Accounting, Masjed-Soleiman Branch, Islamic Azad University, Masjed-Soleiman, Iran.
4 - Department of Accounting, Khoramshar International Branch, Islamic Azad University, Khoramshar, Iran Iran.

Received: 2024-07-12 Accepted : 2024-12-07 Published : 2025-03-11

Keywords: Board diversity, Stock price crash risk, Institutional ownership,

Abstract :

Abstract This study examines the impact of institutional ownership on the relationship between board diversity and the stock price crash risk in companies listed on the Tehran Stock Exchange. The sample consists of 115 companies during the period from 2016 to 2022. The research hypotheses were tested using multivariate regression with panel data approach. The board diversity includes relationship-oriented diversity (gender and age) and task-oriented diversity (education and responsibility).The results suggest that the board diversity of relation-oriented and task-oriented reduces the stock price crash risk, which is in accordance with the agency theory that a board diversity can increase management oversight, and companies with diversified board, tend to publish more information, which reduces information asymmetry, agency costs and the stock price crash risk. The results also indicate that the presence of institutional owners intensify the negative relationship between board diversity and the stock price crash risk. In other words, with the increase of institutional ownership and board diversity, both in terms of relation and task and due to their active supervision, managers' decisions to increase the disclosure of good and bad news at the same time will be and they avoid from decisions that increase the stock price crash risk.

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