The winner's curse in high-tech enterprise certification: Evidence from stock price crash risk |
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| Affiliation: | 1. School of Economics and Management, University of Science and Technology Beijing, China;2. Adelaide Business School, University of Adelaide, Australia;3. College of Business, University of Texas at San Antonio, USA;4. International Business School Suzhou, Xi''an Jiaotong-Liverpool University, China;1. Birmingham Business School, University of Birmingham, Edgbaston, Birmingham B15 2TY, United Kingdom;2. School of Management and Economics, Cyprus University of Technology, Lemesos 3036, Cyprus;1. School of Economics and Management, University of Science and Technology Beijing, China;2. Adelaide Business School, University of Adelaide, Australia;3. International Business School Suzhou, Xi''an Jiaotong-Liverpool University, China;1. School of Business and Management, Jilin University, Changchun, China;2. College of Business, University of Texas at San Antonio, Texas, USA;3. International Business School Suzhou, Xi''an Jiaotong-Liverpool University, China;1. Adelaide Business School, University of Adelaide, Australia;2. Adelaide Business School, University of Adelaide, 10 Pulteney Street, Adelaide, South Australia, 5005, Australia.;1. Central University of Finance and Economics, No. 39 in Southern College Road, Haidian District, Beijing, China;2. Shandong University of Finance & Economics, No. 40 in Shungeng Road, Jinan, China;1. School of Finance, Central University of Finance and Economics, Beijing 102206, China;2. School of Management and Economics, The Chinese University of Hong Kong, Shenzhen, China |
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| Abstract: | Exploiting the High and New Technology Enterprise (HNTE) certification program in China, we find a significant increase in firm-specific stock price crash risk for certified firms relative to non-certified firms. The result holds after a battery of robustness tests. Importantly, we find that the increase in stock price crash risk is concentrated in firms with poor innovation records before receiving HNTE certification, with less innovation improvement after obtaining HNTE certification, with weak external governance, and for state-owned enterprises. Our findings uncover a novel and substantial cost of HNTE certification as it can stimulate strategic bad news hoarding and release, being associated with greater crash risk, especially for firms less likely to engage in fact-based innovation. |
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