Corporate Innovation and Crash Risk: Output and Input Channel

42 Pages Posted: 15 Jul 2020

See all articles by Guanglei Zhou

Guanglei Zhou

Central University of Finance and Economics (CUFE) - Chinese Academy of Finance and Development

Feng Guo

Central University of Finance and Economics (CUFE)

Date Written: June 22, 2020

Abstract

Crash risk has been a hot dispute since financial crisis (2008) and the Chinese stock market crash (2015). Many literature including features of managers have been discussed to connect them with crash risk. However, fewer literatures focus on the channel between innovation and crash risk. In this paper, two different channels of innovation input and output have been constructed to explain the crash risk. Innovation input, R&D activities under earnings management, increase the information asymmetry and crash risk, while innovation output, patent quality for its public availability for datum, decrease the information asymmetry, and crash risk. Sample selection for innovative firms and non-innovative firms have been examined to be robust. The financial crisis has also been tested to verify the crash risk. We hope to build two mechanisms for conduction between innovation and crash risk in China.

Keywords: innovation, R&D capitalization, earnings management, patent, crash risk

JEL Classification: G30, O30, O32

Suggested Citation

Zhou, Guanglei and Guo, Feng, Corporate Innovation and Crash Risk: Output and Input Channel (June 22, 2020). Available at SSRN: https://ssrn.com/abstract=3632771 or http://dx.doi.org/10.2139/ssrn.3632771

Guanglei Zhou (Contact Author)

Central University of Finance and Economics (CUFE) - Chinese Academy of Finance and Development ( email )

39 South College Road
Beijing
China

Feng Guo

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

39 South College Road
Haidian District
Beijing, Beijing 100081
China
+861062288675 (Phone)
+861062288779 (Fax)

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