Nonfinancial indicators in identifying stock price crash risk

Lang Wei and Yiling Zhang

Finance Research Letters, 2023, vol. 52, issue C

Abstract: This study examines whether significant inconsistencies between the financial and nonfinancial measures can be used to identify stock price crash risk. We find that the greater difference between financial (e.g., revenue growth rate) and nonfinancial measures (e.g., sales volume growth rate, production volume growth rate and inventory volume growth rate), the higher stock price crash risk. The mechanism tests show that the differences steming from corporate fraud, real activities manipulation, and over-investment are the main reason for the effectiveness of non-financial measures in identifying the stock price crash risk. Furthermore, we find that this positive relationship is more significant in non-state-owned enterprises, and firms with poorer information environment.

Keywords: Nonfinancial measures; Stock price crash risk; Corporate fraud; Real activities manipulation; Over-investment (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:52:y:2023:i:c:s1544612322006894

DOI: 10.1016/j.frl.2022.103513

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