The Driving Factors of Stock Price Crash Risk

Abstract

Factors that increase the likelihood of a stock market collapse are examined in this study via a review of the empirical literature. We focus on the main drivers relating to the potential for a decline in stock prices, including market factors, variables unique to the company, and those industry- and country-wide factors. Our findings suggest a multi-faceted phenomenon linked to the potential fall of stock prices. Market parameters, including liquidity, market capitalization, and volatility, influence the likelihood of a stock price fall.
Similarly, firm-specific factors, such as leverage, leverage ratio, and firm size, significantly impact stock price crash risk. Finally, macroeconomic factors, such as GDP growth, inflation rate, and exchange rate, are also important factors that might cause a stock market meltdown. In conclusion, the danger of a fall in stock prices is influenced by various circumstances and is a complicated and multi-faceted phenomenon.