This study investigates the hitherto unexplored questions of whether and how a material weakness in internal control over financial reporting (ICW) and its disclosure influence the occurrence of extreme negative outliers in stock return distributions, which we refer to as stock price crash risk....

We examine the relation between creditor rights and stock price crash risk by exploiting the staggered enactment of anti-recharacterization laws that gives lenders greater access to the collateral and thus strengthens creditor rights. We find robust evidence that stock price crash risk subsides...