China Accounting and Finance Review

, 18:11

First online:

Open Access This content is freely available online to anyone, anywhere at any time.

Corporate Pyramids and Stock Price Crash Risk: Evidence from China

  • Xiaorong LiAffiliated withSchool of Public Finance and Taxation, Central University of Finance and Economics Email author 
  • , Nianhang XuAffiliated withSchool of Business, Renmin University of China
  • , Qiao LiuAffiliated withGuanghua School of Management, Peking University
  • , Wei LuoAffiliated withGuanghua School of Management, Peking University


This paper examines the impact of corporate pyramids on the stock price crash risk of listed firms in China. Our results show that, first, the pyramidal layer of state-owned enterprises (SOEs) can reduce stock price crash risk through the three channels of improving financial statement transparency, increasing accounting conservatism, and decreasing overinvestment. Second, the greater the related party transactions, the weaker the negative relation between the pyramidal layer and crash risk, while this negative relation is strengthened by Hong Kong cross-listing. Further analysis shows that the corporate pyramidal layer of SOEs can also decrease stock price synchronicity. For non-state-owned enterprises (NSOEs), we find that there is an inverse U-shaped relationship between the corporate pyramidal layer, crash risk, and stock price synchronicity. These findings have important policy implications in promoting the sound and stable development of the capital market in China.


Corporate Pyramids Stock Price Crash Risk Controlling Shareholders Stock Price Synchronicity