The stock market is prone to fluctuations, but with proper management, it is extremely profitable. On this occasion, the Universitas Muhammadiyah Yogyakarta International Program of Accounting (IPACC) invited a guest lecturer from National Central University (Taiwan) Hongming Huang, B.B.A., M.B.A., Ph.D to discuss the risks of falling stock prices.
Hongming mentioned that a company will try to cover up all news to save its share price. “A company manager will hide bad news for a long time to avoid the side effects on compensation as a consequence of declining stock prices. When the accumulation of bad news is finally revealed to the market, it will cause a large negative decline in the fall of the stock price (Stock Price Crash Risk),” he told UMY IPACC students who were present at the Amphitheater Room on the 4th Floor of the Postgraduate Building, UMY Central Campus.
Stock Price Crash Risk needs to be controlled when managing shares. According to Hongming, there is a high-risk scenario that can give high returns to investors when the stock price does not match its expectations. “Investors demand higher expected returns on their shares when the slope of the stock price is reasonable. It is considered a reward for accepting this risk,” the National Central University Taiwan lecturer continued.
Panic caused by the decline in share prices occurs often, especially for investors who are afraid of losing their shares. Hongming said that corporate leaders are needed and are crucial to deal with the risk of falling stock prices and the loss of investors. “Excessive confidence from management, the age of the CEO, and the skills of the CEO are very influential on the collapse of share prices in the future. With those characteristics, bad news regarding shares can be covered up by CEOs for a long time, but of course, that creates a high risk of future stock falls. ”
One participant of the lecture asked Hongming on how we as investors avoid stock price crash risk in the future. Hongming answered the question thusly. “As an investor, you must understand the details of the stock you are about to invest. This includes the historical data of the stock. I hope all participants can understand the Stock Price Crash Risk Better, and if you are interested in writing a thesis about said topic, you may contact me for further information,” Hongming closed. (Hbb)