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Digital finance and stock price crash risk

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  • Ai, Yongfang
  • Sun, Guanglin
  • Kong, Tao

Abstract

This paper examines the effects and mechanisms of digital finance on the risk of stock price collapse using a sample of Chinese A-share listed enterprises from 2011 to 2020. The finding indicates that digital finance has the ability to prevent corporate share price collapse, with the depth of digital finance usage exerting a significantly stronger effect compared to the breadth of digital finance coverage. Meanwhile, the results from the intrinsic mechanism analysis reveal that the information transparency, agency costs, and stock price synchronization act as mediating variables through which digital finance to inhibit the risk of stock price collapse. Furthermore, our empirical results reveal heterogeneity in the inhibitory effect of digital finance on the risk of stock price collapse among different types of enterprises. The aforementioned effect is significant for large-sized enterprises, state-owned enterprises, and enterprises operating in financially developed regions. However, it is not significant for small-sized enterprises, private enterprises, and enterprises in financially underdeveloped regions. By focusing on taking digital technology to alleviate information asymmetry, this paper clarifies the intrinsic mechanisms and applicable environments through which digital finance influences the risk of stock price collapse. Ultimately, this paper provides novel empirical evidence on strategies for reducing the risk of stock price collapse and maintain stability in financial market.

Suggested Citation

  • Ai, Yongfang & Sun, Guanglin & Kong, Tao, 2023. "Digital finance and stock price crash risk," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 607-619.
    • Handle: RePEc:eee:reveco:v:88:y:2023:i:c:p:607-619
    DOI: 10.1016/j.iref.2023.07.003
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    Cited by:

    1. Sun, Guanglin & Wang, Jiawei & Ai, Yongfang, 2024. "The impact of government green subsidies on stock price crash risk," Energy Economics, Elsevier, vol. 134(C).
    2. Sun, Guanglin & Yin, Ding & Kong, Tao & Yin, Lei, 2024. "The impact of the integration of the digital economy and the real economy on the risk of stock price collapse," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).

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