Could the simultaneous persistence of greater cash holdings and interest‐bearing debts affect stock price crash risk?

We study the impact of a unique financial anomaly—the simultaneous persistence greater cash holdings and interest-bearing debts (SP-GCHID) on stock price. Due to institutional diversity nature transition economies, high do not always stem from precautionary motive as usually claimed but can be result misappropriation debt manipulation by major shareholders. Analysing data Chinese listed firms 2010 2018, we find that SP-GCHID is associated with higher price crash risk (SPCR). It more evident among shareholders pledging their shares exposed external information monitoring. also affects SPCR through increasing real earnings management, further suggesting shareholders' main reason for SP-GCHID's adverse effect. These findings are robust in range endogenous tests. To our knowledge, this first explore economic consequences SP-GCHID.