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

Authors

  • 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, Paris La Défense, Institut de Recherche en Gestion (EA 2354)? Université Paris Est, France

DOI:

https://doi.org/10.54695/bmi.162.4639

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.

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. https://doi.org/10.54695/bmi.162.4639

Issue

Vol. 162 (2020): Special issue Risk Analysis : New Assets, New Approaches

Section

Articles