Analysing The Impact of Managerial Ability and Stock Price Crash Risk: The Mediating Role of Financial Performance In The Indonesian Capital Market

Managerial ability is a key determinant of firm performance. The Indonesian capital market is an emerging market that offers investors significant opportunities but is accompanied by substantial risks. Our study utilises a sample of firms listed on the Indonesia Stock Exchange from 2013 to 2023, specifically those included in the LQ45 index, comprising a final dataset of 810 firm-year observations. This study employs multiple linear regression analysis conducted using Stata software. We examine the relationship between managerial ability and stock price crash risk, with financial performance as a mediating variable. Some of our findings indicate varied outcomes when considering the characteristics of firms in Indonesia. One reveals that the total effect of the relationship between managerial ability and stock price crash risk, mediated by financial performance, is more potent in non-family firms than family firms. These findings are expected to provide investors with a deeper understanding of the characteristics of the Indonesian capital market. While the market offers considerable opportunities, it also presents potential risks for investors.