Intangible Intensity and Stock Price Crash Risk

Abstract

We evaluate the effect of intangible intensity on stock price crash risk for listed US firms from 1983 to 2017. We find that intangible-intensive firms are associated with significantly higher stock price crash risk. Decomposition of intangible intensity show that goodwill intensity is the driving force of crash risk, as it predicts future goodwill impairments, increases investors' opinion divergence and valuation uncertainty. The results support the information asymmetry being identified as the underlying channel. Furthermore, the effect of intangible intensity is stronger in firms facing high product market competition, CEO incentives, and external monitoring. Overall, our findings demonstrate the fragility of intangible assets and provide implications for financial regulation and portfolio risk management.

Keywords: intangible intensity, information asymmetry, crash risk

JEL Classification: G10, G11, G14