Negative Performance Aspiration Gap and Stock Price Crashes: Based on Behavioral Theory and Agency Theory Perspective*

The paper explores how agency behavior of insiders within a company influences the risk of a stock price crash in the context of a continued expansion of the performance expectation gap. A panel data analysis of 10 727 observations of Chinese A-share listed companies over the period 2003–2020 shows that as the negative performance aspiration gap widens, stock price crashes are more likely to occur. Furthermore, the separated role of top management and chairperson and an increase in the ownership proportion of major shareholders significantly amplifies the positive effect, whereas the increase in managerial shareholding and the equity balance diminish the main relationship.