When the crowd crashes the market: consumer complaints, informal monitoring, and stock price crash risk

Purpose This study aims to investigate whether and how consumer complaints function as an informal monitoring force affecting stock price crash risk. Design/methodology/approach This research employs a two-way fixed effects model using a matched dataset of China A-share listed firms and complaint records from the “Black Cat Complaints” platform for 2019–2023. We further corroborate the findings through endogeneity tests and heterogeneity analyses. Findings Consumer complaints increase future stock price crash risk through three channels: external triggering, by attracting media coverage and investor attention; managerial bad-news hoarding, by reducing disclosure transparency and Management Discussion and Analysis specificity; and industry spillover, by diffusing negative signals to peer firms. Further analyses show that complaint frequency predicts crash risk more strongly than claimed monetary amount, indicating that the recurrence of complaints contains more market-relevant information than their financial magnitude. Full resolution weakens but does not eliminate the complaint effect, stronger negative sentiment in complaint texts intensifies crash risk, and the effect persists into subsequent years. Originality/value This study is the first to reveal the impact of consumer complaints on stock price crash risk, clarifying how the negative signals conveyed by consumers transmit from firm level to capital market. This finding suggests that complaints contain market-unassimilated negative information predicting future crash risk, offering valuable insights for firms, investors and regulators.