Derivative Complexity And Stock Price Crash Risk

The increasingly complex macroeconomic environment at home and abroad has increased the demand for derivatives and other risk management tools in China's real economy.China's derivatives market is developing very rapidly,and various varieties are becoming more and more abundant.Derivatives have attracted more and more attention from regulators,investors and managers.As we all know,derivatives are a double-edged sword,which can resist risks for enterprises,but also may bring huge losses for enterprises.Therefore,the controversy and Discussion on the economic consequences of derivatives and how to develop China's derivatives market has never stopped.However,the current academic circles pay less attention to the complexity of derivatives and its economic consequences.This paper examines the impact of derivatives use and its complexity on the risk of stock price crash by taking A-share listed companies with risk exposure from 2010 to 2016 as samples.The empirical results show that the risk of stock price crash for derivatives users is lower than that for non-users,and the risk of stock price crash decreases significantly with the increase of economic complexity and accounting complexity of derivatives.In the further study,we also find that the results are more significant in the grouped samples of non-state-owned enterprises,low level of internal control and high transparency of information.At the same time,the processing effect test results show that the use of derivatives does exist self-selection problems,but does not affect the main regression results,the conclusion is more reliable.In order to control the missing variables,the regression results of PSM paired samples remain unchanged.The contributions of this paper are as follows: Firstly,the overall use of derivatives of Listed Companies in China is described in detail for the first time,and it is found that the use and complexity of derivatives reduce the risk of stock price crash for the first time.Secondly,based on the data of all A-share listed companies selected manually,this paper describes the use of derivatives from two dimensions: economic complexity and accounting complexity.The indicators are more detailed and the results are more robust.Thirdly,the research results of this paper expand the study of economic consequences of derivatives complexity and explore the effects of domestic derivatives information.Fourthly,this paper continues to expand other significant elements which play an important role in the risk of stock price crash in China,and provides a new perspective for the study of information issues in China's capital market.The practical significance of this research conclusion is to deepen the understanding of derivatives business of users and operators of external statements,and to provide some help for policymakers to strengthen derivatives supervision.Based on the empirical results,this paper argues that China should strengthen and refine the supervision of information disclosure of derivatives,especially the purpose of use,the selection of fair value parameters and the types and nominal amounts of risk information.Moreover,it is necessary to attach great importance to the use of more complex derivatives.However,while keeping vigilance against high-risk and abuse incidents,it is still necessary to encourage enterprises to actively participate in derivatives activities within the scope of controllable risk,and rational use of derivatives tools can be conducive to the development of enterprises.