THE RESILIENCE OF BLUE-CHIP STOCKS: MANAGERIAL ABILITY, AUDIT QUALITY, AND STOCK PRICE CRASH RISK IN THE INDONESIA LQ45 INDEX

Abstract

This study aims to examine the effect of managerial ability on stock price crash risk, the moderating role of audit quality, and the impact of financial leverage within the Indonesia LQ45 index. While blue-chip stocks are perceived as highly resilient, they remain susceptible to firm-specific crash risks driven by bad news hoarding. This research employs a quantitative explanatory design using panel data from 22 LQ45 companies over the 2022-2025 period, resulting in 88 firm-years observations. The Down-to-Up Volatility (DUVOL) proxy measures crash risk, the Demerjian scores assesses managerial ability, and a Big Four dummy represent audit quality. To eliminate extreme multicollinearity in the moderation model, this study applies an orthogonalization technique to the interaction variable. Based on the model selection tests, Pooled Ordinary Least Square (OLS) was selected as the most efficient model. The results reveal that managerial ability and audit quality do not significantly affect stock price crash risk, nor does audit quality moderated this relationship. Conversely, leverage exhibits a significant negative effect in crash risk. In conclusion, high leverage serves as a strict disciplinary mechanism that prevents managers from withholding negative information, thereby mitigating crash risk in mature blue-chip companies. Meanwhile, managerial competence and Big Four audits function merely as baseline governance expectations rather than primary risk differentiators