The Impact of Debt Structure on Future Stock Price Crash Risk: Evidence from Egypt

The main objective of the study is to determine the extent impact of debt structure proxies on future stock price crash risk and its different measures in order to mitigate stock price crash risk and help investors to understand better crash risk consequences and modify their investing behavior. Additionally, it is a guide for regulators to better achieve the credit market and to create an intact credit protection system. The study was conducted on a sample of (13) firms representing (40.6%) of the total number of the real estate sector firms listed in the Egyptian Stock Exchange during the period from 2013 to 2019.
The empirical results concluded that firms with high each of trade credit ratio, net trade credit ratio, trade credit to bank credit ratio, and debt structure characteristics have a lower stock price crash risk which was measured as negative conditional skewness of weekly returns, down-to-up volatility, and aggregate stock price crash risk. As for the control variables namely average weekly returns, financial leverage, and return on total assets were negatively significant for all three measures of stock price crash risk. Whilst, the firm size was a positively significant impact on stock price crash risk. While the study indicated that there was an insignificant impact of the bank credit ratio and the control variables namely investor heterogeneity, returns volatility, and market-to-book ratio on stock price crash risk measures in the future. The study also presented valuable recommendations to increase the different monitoring roles of the debt structure proxies in decreasing opportunistic behaviors and alleviating the likelihood of future stock price crash risk in Egypt which finally leads to rationalizing stakeholders' decisions.