دانلود رایگان مقاله انگلیسی استراتژی کسب و کار، سهام بیش ارزش گذارى شده و خطر سقوط قیمت سهام - نشریه الزویر

abstract

This paper examines empirically the effect of firm-level business strategies on future stock price crash risk, and the extent to which equity overvaluation moderates this relation. By exploring the extent to which firms following particular business strategies are more or less likely to experience crash risk, we provide evidence that increases our understanding ofthe underlying determinants of crash risk. Using a composite strategy score developed by Bentley, Omer and Sharp (2013) and applying two variants of crash risk, we document that firms following innovative business strategies (prospectors) are more prone to future crash risk than defenders. We also find that prospectors are more prone to equity overvaluation which, in turn, increases future crash risk.

7. Conclusion

Stock price crash risk is a vital element in stock returns to investors because of its undiversifiable nature. Given the importance of crash risk, it is not surprising to find a growing body of literature exploring the likely determinants of crash risk. Financial reporting opaqueness, proxied both by accruals and real earnings management, managerial propensity to engage in tax avoidance activities, and equity incentives, have all been found to explain the variation in crash risk. However, these outcomes are very much a product of the firm-level business strategies pursued by individual firms. By exploring the extent to which firms that follow particular business strategies are more or less likely to experience crash risk, we provide evidence that increases our understanding of the underlying determinants of crash risk.

We use the Miles and Snow (1978, 2003) strategy typology that focuses on the organization’s rate of change regarding its products and markets. We argue that the asymmetric market response to negative earnings surprises reported by firms following prospector business strategies, and the long-term incentive-based compensation design for these firms, induce managers to withhold bad news which increases future crash risk. Our empirical findings show that firms with high (low) strategy scores are more (less) prone to crash risk. We also find that firms following innovator business strategies are more prone to equity overvaluation and the combination of these two further increases future crash risk.

Our study contributes to the growing literature on both stock crash risk and corporate strategy. We extend the crash risk literature by showing that firm strategy is one important determinant of stock crash risk. an understanding ofthe association between business strategies and crash risk would assist investors in allocating resources carefully among companies with different business strategies. We also contribute to the strategy literature by showing that business strategies have wider implications as they can affect the probability of firm-level crash risk by altering the timing of information disclosure.