Intangible Intensity and Stock Price Crash Risk

60 Pages Posted: 16 Jan 2020 Last revised: 19 Jun 2020

See all articles by Kai Wu

Kai Wu

Central University of Finance and Economics (CUFE) - School of Finance

Seiwai Lai

Central University of Finance and Economics (CUFE) - School of Finance

Date Written: June 19, 2020

Abstract

We evaluate the association between intangible intensity and stock price crash risk for U.S. listed firms from 1983 to 2017. The results show that intangible-intensive firms are associated with high crash risk. The decomposition of intangible intensity identifies goodwill as the driving force and documents its predictability for future impairment events. Moreover, intangible intensity affects stock price crash risk mainly through increased information asymmetry, and the positive association increases with stock price synchronicity, CEO risk-taking incentives, and shareholder litigation risk. Our findings demonstrate the fragility of intangible assets and provide implications for financial regulation and portfolio management.

Keywords: Intangible intensity, Information asymmetry, Crash risk

JEL Classification: G10, G11, G14

Suggested Citation

Wu, Kai and Lai, Seiwai, Intangible Intensity and Stock Price Crash Risk (June 19, 2020). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3511418 or http://dx.doi.org/10.2139/ssrn.3511418

Kai Wu (Contact Author)

Central University of Finance and Economics (CUFE) - School of Finance ( email )

Beijing
China

Seiwai Lai

Central University of Finance and Economics (CUFE) - School of Finance ( email )

Beijing
China

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