Research On The Effect Of Listed Companies Risk Taking On Stock Price Crash

Stock price crash is an important factor affecting the quality and stable sustainable development of financial market.The Political Bureau of the CPC Central Committee held a meeting on July 30,2020 to promote the construction of the basic capital market regulations,crack down the illegal securities activities,and promote the development of the capital market in healthy and steady way.After promoting the healthy and stable development of the capital market has become an important regulatory goal of the government,exploring the determinants of stock price crash risk has become the focus of researchers and practitioners.According to the traditional view,the basic cause of stock price crash risk is "the hiding of bad information and the subsequent concentrated release of the hidden news".Current literature mainly explore the determinants of stock price crash risk at the macro,industry and micro level.However,insufficient attention has been paid to the issue of how corporate risk taking behavior affects the source of "bad news" and in turn affects stock price crash risk.In addition,researches on corporate risk taking generally believe that corporate risk taking has a positive impact on corporate value.However,any behavior can all be seen as a "double-edged sword",especially the risk taking behavior with the basic characteristics of high risk and high earnings.From the viewpoint of capital market,the value effect of a corporate risk taking behavior is finally reflected in the stock price.For example,failure of corporate risk taking behavior can lead to the rapid decline of the stock price in a short period.Based on the above intuitions,this paper takes how corporate risk taking affects stock price crash risk as the core issue to reveal to clarify whether corporate risk taking affects stock price crash risk and the underlying mechanism.First,based on the comprehensive and systematic literature review,this paper identifies the gaps and potential research opportunities existing in studies on the economic consequences of corporate risk aking and the determinants of stock price crash risk.Secondly,based on the backgrounds of China’s A-share market,this paper makes a comprehensive theoretical analysis based on relevant theories,clarifies and constructs the mechanism framework of corporate risk taking affecting stock price crash risk,and introduces relevant research hypotheses.Finally,taking Chinese A-share listed companies as sample,this paper uses a variety of empirical testing methods conducting empirical test,robustness test,moderating effect test and mediating effect test on the relationship between corporate risk taking and stock price crash risk,and obtains relevant empirical evidences to verify the basic hypotheses.The evidences show that measures of corporate risk taking level related with investment,financing,asset allocation and financial reporting decision-making can affect stock price crash risk positively,especially the measure related with asset allocation,but the measure related with financial reporting has the least positive effect on stock price crash risk.After robustness tests,including changing dependent variables,changing independent variables and changing sample years,the positive impact of corporate risk taking on stock price crash risk is still significant.The evidences from moderating effect test results show that managerial competence and institutional investors’ ownership have a negative moderating effect on the positive impact of corporate risk taking on stock price crash risk,while product market competition and investor sentiment have positive moderating effect.The results of the mediating effect test show that the sensitivity of management compensation performance and information opacity play a partial mediating role in the relationship between corporate risk taking and stock price crash risk,that is,corporate risk taking influences stock price crash risk by changing the motivation and ability of management to hide bad news.The main work and innovative achievements of this paper are reflected in the following aspects:First,through literature review,it is found that the existing literature on stock price crash risk focuses on the study of determinants stock price crash risk,ignoring the origin of stock price crash risk that the corporate undertakes too much risk.The direct or apparent cause of stock price crash risk is the concentrated outbreak of senior executives hiding "bad news",but the formation of "bad news" should be closely related to the corporate risk taking.It is helpful to prevent and resolve stock price crash risk by exploring the determinants of stock price crash risk from the source.Second,most studies on the economic consequences of corporate risk taking believe that corporate risk taking is an important result of alleviating agency problems and has a positive impact on corporate value,while ignoring its potential "negative effects",especially the potential negative effects of high losses caused by corporate risk taking.This study focuses on the negative consequences of corporate risk taking and considers corporate risk taking as the "source of stock price crash risk",which together with existing academic views constitutes a logical and rigorous academic ideological system for the study of determinants of stock price crash risk.Third,build a more direct and comprehensive index system to measure the level of corporate risk taking behavior.Existing researches mostly use a single index to measure corporate risk taking,which cannot fully reflect the level of corporate risk taking.Based on the financial behaviors such as asset allocation decision,investment decision,financing decision and financial information disclosure decision,this paper adopts the method of combining single and comprehensive indicators to measure the level of corporate risk taking more directly and comprehensively.Fourth,on the basis of comprehensive literature review,a systematic and comprehensive theoretical and logical path of corporate risk taking affecting stock price crash risk is constructed,and it is believed that corporate risk taking may affect stock price crash risk through the motivation and ability of management to hide bad news.This paper empirically conducts the moderating effect test.The empirical results show that corporate risk taking has a significant positive impact on stock price crash risk,among which corporate risk taking in the asset allocation decision dimension has the greatest impact on stock price crash risk.From the perspective of asset stock,it is confirmed that investment is the main source of the corporate risk taking.The performance sensitivity of management compensation and information transparency play a partially moderating role in the relationship between corporate risk taking and stock price crash risk.This paper considers corporate risk taking as the source of stock price crash risk,and constructs several measures of corporate risk taking related with specific corporate risk taking behaviors to explore whether and how corporate risk taking affect stock price crash risk and clarify the mechanism through which corporate risk taking affect stock price crash risk.Theoretically,this paper enriches the research on the economic consequences of corporate risk taking and the determinants of stock price crash risk.From the practice,this paper is helpful for improving the efficiency of stock market regulation and is useful for investor education,and can prevent systemic financial risks and improve the effectiveness of corporate risk taking behavior management,also help the corporate to evaluate the economic consequences of firm risk more effectively.