Abstract

The Pakistan Stock Exchange (PSX) appears to be highly vulnerable to market volatility and Stock Price Crash Risks. Therefore, it aims to explore significant causes of sudden and unexpectedly profound falls in the PSX stock price. The study draws upon 66 companies and panel data with 660 observations to investigate the relationships explored through the GLS model to determine the first-order panel stochastic legislation toward stationarity. The investigation targets important financial variables along with Negative Conditional Return Skewness (NCSKEW) and Downside Volatility (DUVOL), which impressionist the stock price crash risk. Consequently, the study establishes that earnings smoothing and brand capital play a part in moderating the positive effect on stock price crash risk; however, stock liquidity is inverse. Other predictors of crash risk are the firm’s size, its return on assets, the level of its leverage, and the ratio of market-to-book values. Such findings are helpful in several actors in a nation’s economy, especially in emerging markets such as Pakistan, including business leaders, investors, and policymakers, to manage risks accordingly. The study also suggests future research examining industry and macroeconomic factors to identify stocks with high-risk crashes in emerging markets.