Electronic Theses and Dissertations


Hung Dong Cao



Document Type


Degree Name

Doctor of Philosophy


Business Administration

Committee Chair

Pankaj Jain

Committee Member

Pankaj Jain

Committee Member

Jeff Black

Committee Member

Allen Carrion

Committee Member

Sabatino Silveri


Despite a longstanding debate over the pros and cons of imposing legal liability on corporate directors and officers, there is limited research on how managerial litigation affects a firm’s future stock price crash risk. Essay 1 examines how the change in Nevada corporate law in 2001, which lowers the legal liability of corporate managers of Nevada-incorporated firms, affects the likelihood of future stock price crashes. We find that such a legal change leads to a decrease in stock price crash risk, and the effect is more pronounced for small, young, and weakly governed firms. Further analysis indicates that the decrease in crash risk is driven by reduced earnings management and enhanced quality of corporate information disclosures. Overall, our evidence suggests that lower managerial legal liability encourages managers to improve corporate information environment that decreases stock price crash risk. In Essay 2, exploiting the staggered adoption of data breach notification (DBN) laws, which obligate firms to disclose data breaches when they occur, as an exogenous shock to data breach disclosures, we find that the adoption of these laws leads to higher future stock price crash risk. The positive relation between DBN laws and crash risk is more pronounced for firms with weaker corporate governance, higher financial constraints, and higher information asymmetry. Our findings suggest that investors’ concerns about the consequences of data breaches and the vulnerability of breached firms’ data security heighten stock price crash risk. Essay 3 investigates the impact of psychological barriers on institutional trading behaviors. We find that net institutional demand is positively associated with proximity to the 52-week highs, while it is negatively associated with proximity to the historical highs. Conditioning these price-to-high ratios, we further show that institutional trading can strongly predict future stock returns. Overall, these findings support behavioral exploitation hypothesis, suggesting that institutional investors capitalize on other investors’ behavioral biases.


Data is provided by the student.

Library Comment

Dissertation or thesis originally submitted to ProQuest.


Embargoed until 11/1/2024

Available for download on Friday, November 01, 2024