Do overpaid dividends drive stock price crash risk?

Abstract We explore the impact of overpaid dividends on future stock price crash risk. Using a dataset of 2662 firms with 15,416 firm‐year observations of China's A‐share listed firms, our result indicates that overpaid dividends are positively related to the likelihood of future stock price crash risk. The results further suggest that high‐quality corporate governance and financial analyst coverage can moderate the positive effect of overpaid dividends on the crash risk. Moreover, continuous overpaid dividends and state‐owned enterprises with overpaid dividends have a stronger impact on the crash risk, and overpaid dividends are significantly affected by their peer firms.