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

Author

Listed:
  • Sabri Boubaker

    (Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School, IRG - Institut de Recherche en Gestion - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel)

  • Assil Guizani

    (CEROS - Centre d'Etudes et de Recherches sur les Organisations et la Stratégie - UPN - Université Paris Nanterre, USO - جامعة سوسة = Université de Sousse = University of Sousse)

  • Faten Lakhal

    (DVHE - De Vinci Higher Education, IRG - Institut de Recherche en Gestion - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel)

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.

Suggested Citation

  • Sabri Boubaker & Assil Guizani & Faten Lakhal, 2020. "Does corporate innovation strategy influence stock price crash risk? French market evidence," Post-Print hal-05071395, HAL.
    • Handle: RePEc:hal:journl:hal-05071395
    DOI: 10.54695/bmi.162.4639
    as

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