Individualistic cultures and crash risk

Tung Lam Dang, Robert Faff, Hoang Luong, Lily Nguyen

Research output: Contribution to journalArticleResearchpeer-review

34 Citations (Scopus)


This study examines whether individualistic national culture is associated with stock price crash risk (‘crash risk’) for a sample of firms from 36 countries over the period of 1990–2015. We find robust evidence that firms in more individualistic cultural settings exhibit higher future crash risk. Digging deeper, we find that earnings management, excessive managerial risk-taking, and investors’ difference of opinion and overconfidence are all possible explanations for the positive effect of individualism on crash risk. Overall, our findings suggest that individualism, as a key cultural dimension, has an important impact on investor welfare, manifested through crash risk.

Original languageEnglish
Pages (from-to)622-654
Number of pages33
JournalEuropean Financial Management
Issue number3
Early online date26 Apr 2018
Publication statusPublished - 2019
Externally publishedYes


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