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Nonfinancial indicators in identifying stock price crash risk

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  • Wei, Lang
  • Zhang, Yiling

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.

Suggested Citation

  • Wei, Lang & Zhang, Yiling, 2023. "Nonfinancial indicators in identifying stock price crash risk," Finance Research Letters, Elsevier, vol. 52(C).
    • Handle: RePEc:eee:finlet:v:52:y:2023:i:c:s1544612322006894
    DOI: 10.1016/j.frl.2022.103513
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