Does corporate innovation strategy influence stock price crash risk? French market evidence

Authors

  • SABRI BOUBAKER
  • ASSIL GUIZANI
  • FATEN LAKHAL

Keywords:

Innovation; Stock price crash risk; Product market competition; Analyst coverage.

Abstract

The purpose of this paper is to examine the effect of corporate innovation strategy on firm-level stock price crash risk. Using a sample of French listed firms covering 2007–2016, we show that innovative firms are more prone to future stock price crash risk. Managers of these firms have optimistic expectations about growth prospects that encourage them to hide bad news, leading to higher stock price crash risk. This positive relationship is only prevalent in competitive product markets and with low analyst coverage suggesting that innovative firms are likely to experience stock price crashes when information asymmetry is exacerbated. Our results stand up to several robustness tests and remain unchanged after addressing endogeneity concerns.

Author Biographies

SABRI BOUBAKER

EM Normandie
Business School,
Métis Lab
Institut de
Recherche en
Gestion (EA 2354)
- Université Paris Est
France

ASSIL GUIZANI

Université Paris
Nanterre, CEROS,
France
LAMIDED -
Université de
Sousse, Tunisie

FATEN LAKHAL

Léonard de Vinci
Pôle Universitaire,
Research Center,
92916 Paris La
Défense
Institut de
Recherche en
Gestion (EA 2354)
- Université Paris Est
France

Published

2020-09-01

How to Cite

BOUBAKER, S., GUIZANI, A., & LAKHAL, F. (2020). Does corporate innovation strategy influence stock price crash risk? French market evidence. Bankers, Markets & Investors, 162(2), 35-44. Retrieved from https://journaleska.com/index.php/bmi/article/view/4639