Financial distress early warning for Chinese listed firms from a crash risk exposure perspective
Wensheng Wang, Zhiliang Liang
Keywords:
Crash risk, Financial distress, Financing, Manufacturing industry
Abstract:
In the face of increasingly volatile global capital markets, merely understanding the causes of stock price crash risk is insufficient; it is also essential to fully grasp the economic consequences of such risks to better respond to black swan events. Based on financial data of 11,336 A-share listed manufacturing firms from 2014 to 2023, this paper employs a logit regression model to explore the impact of crash risk exposure on corporate financial distress two years later, with a particular focus on the transmission roles of the firm itself, creditors, and institutional shareholders. The findings indicate that increased crash risk exposure significantly promotes the occurrence of financial distress. Mechanism analysis further reveals that heightened crash risk exposure deteriorates firms financing conditions by intensifying financing constraints, increasing debt financing costs, and reducing institutional ownership, thereby exacerbating financial distress. A heterogeneity analysis shows that the effect of increased crash risk exposure on financial distress is more pronounced in large firms and in the post-2018 period. This study enriches research on corporate risk management and provides new insights for effectively preventing financial distress and enhancing firm competitiveness.
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 10.7441/joc.2025.03.07
Wang, W., & Liang, Z. (2025). Financial distress early warning for Chinese listed firms from a crash risk exposure perspective. Journal of Competitiveness, 17(3), 170-201. https://doi.org/10.7441/joc.2025.03.07
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