EMPLOYEE WELFARE AND STOCK PRICE CRASH RISK: EMPIRICAL EVIDENCE FROM VIETNAM

This study examines the impact of employee welfare on the future stock price crash risk. Using a manually collected dataset on employee welfare disclosures by firms listed on the Ho Chi Minh Stock Exchange, we find that firms with better employee welfare practices experience a lower risk of stock price crashes. This relationship is driven by the implementation of labor policies for the employees’ safety, health, and welfare. Our findings align with stakeholder theory, which suggests that enhancing employee well-being can strengthen a firm’s reputation in the eyes of stakeholders, thereby contributing to stock price stability. Moreover, managers who prioritize employee welfare may exhibit higher ethical and moral standards, making them less likely to withhold negative information. As a result, the risk of stock price crashes is mitigated. This study contributes to the existing literature by confirming the negative association between employee welfare and stock price crash risk in a frontier market where the weak institutional framework is regarded as a key driver of crash risk. The findings offer important implications for firms, investors, and policymakers.