The Impact of Violation Announcements on Stock Price Crash Risk: Evidence from Vietnam

Abstract

Purpose: The study focuses on analyzing the impact of FRAUD announcements (FA) on stock price crash risk (SPCR) in Vietnam’s stock market during the period 2018-2023. Based on the empirical findings, this study provides policy implications for relevant stakeholders in Vietnam’s stock market.
Design/Methodology/Approach: After the data were automatically collected using Python, diagnostic tests were performed, indicating that the Fixed Effects Model (FEM) is more appropriate OLS and the Random Effects Model (REM). Finally, the Feasible Generalized Least Squares (FGLS) method is used to address autocorrelation and heteroskedasticity, ensuring the reliability of the estimation results.
Findings: The findings reveal that the disclosure of FRAUD announcements contributes to a more transparent information environment, thereby reducing stock price crash risk. Moreover, FRAUD announcements related to financial misconduct exhibit a more pronounced effect compared to those concerning operational non-compliance.
Originality/value: While the impact of FRAUD announcements on stock price crash risk has been extensively analyzed in developed and emerging markets, this topic has received limited attention in frontier markets such as Vietnam. Therefore, this study aims to provide further empirical evidence on the negative impact of FRAUD announcements on stock price crash risk in the Vietnamese stock market.