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The Effect of Friendly Boards on Asset Prices: Evidence From Stock Price Crash Risk

Avishek Bhandari et al.

Journal of Accounting Auditing and Finance2025https://doi.org/10.1177/0148558x251368670article
AJG 3ABDC A
Weight
0.37

Abstract

This study provides statistically and economically significant evidence that friendly boards are positively associated with firm-specific stock price crash risk. The findings suggest that firms with friendly boards are prone to groupthink-induced biases, including lapses in judgment, poor monitoring, and less sophisticated decision-making, all of which elevate the risk of stock price crash. Cross-sectional analyses document that the positive association between friendly boards and stock price crash risk is less pronounced for firms with high levels of performance-based compensation, susceptibility to hostile takeovers, significant institutional ownership, and a strong presence of religiosity. These findings imply that the adverse effects of friendly boards are diminished under specific circumstances. Additional analyses show that boards are aware that CEOs in firms with friendly boards withhold information from the market, and bad news disclosures are more prevalent in firms experiencing stock price crashes.

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https://doi.org/https://doi.org/10.1177/0148558x251368670

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@article{avishek2025,
  title        = {{The Effect of Friendly Boards on Asset Prices: Evidence From Stock Price Crash Risk}},
  author       = {Avishek Bhandari et al.},
  journal      = {Journal of Accounting Auditing and Finance},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1177/0148558x251368670},
}

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The Effect of Friendly Boards on Asset Prices: Evidence From Stock Price Crash Risk

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Evidence weight

0.37

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.16 × 0.4 = 0.06
M · momentum0.53 × 0.15 = 0.08
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.