Corporate Diversification,Over-Investment And Stock Price Crash Risks

After more than 20 years of development,China's capital market has made great achievements in terms of market size and total transaction volume.However,in recent years,the issue of stock price “popping up and down” has been particularly prominent.Among them,the stock price crash risk not only damages the interests of small and medium investors,but also undermines the confidence of investors,and also undermines the stable operation and healthy development of the capital market,resulting in inefficient capital allocation and financial instability in the capital market.At present,most of the researches on the stock price crash risk in the academic circles at home and abroad focus on the two directions of information asymmetry and agency conflict.Few scholars study the risk of stock price crash from the perspective of diversification of enterprises.Diversification is one of the important ways for Chinese enterprises to become bigger and stronger,and it is also the main direction of enterprise development in recent years.So,how does diversification affect the risk of a stock price crash? Some studies have found that some companies are over-investing in the diversified business.Therefore,this paper further considers the impact of diversification on the risk of stock price crash in the case of over-investment.This paper takes A-share listed companies in 2008-2017 as a sample to study the impact of diversification and over-investment on the risk of stock price crash.Through empirical research,it is found that: First,the diversification of enterprises and the risk of stock price crash will have two completely opposite correlations.Specifically,the diversification of corporate diversification during 2008-2015 is negatively correlated with the risk of stock price crash;from 2016 to 2017,corporate diversification was positively correlated with the risk of stock price crash.After further research,it was found that this phenomenon was more prominent in small and medium-sized enterprises,private enterprises,and enterprises with small agency conflicts.Second,over-investment will have an impact on the correlation between diversification and stock price crash.Specifically,when there is an over-investment,the negative correlation between the “premium effect” diversification and the stock price crash risk is more significant.That is,diversification at this time can alleviate the risk of stock price crash.And the positive correlation between the diversification of “discount effect” and the risk of stock price crash is weakened,that is,the negative effects between the diversification and the stock price crash risk at this time are weakened.In this paper,the robustness analysis is carried out from several angles,and the conclusion is basically unchanged.According to the research findings,this paper proposes that private enterprises and small and medium-sized enterprises should be more cautious and diversified;and they should carry out many suggestions such as efficiency investment and avoiding excessive investment.There are two innovations in this paper.First,study the risk of stock price crash from the perspective of diversification of enterprises;secondly,deeply consider the adjustment mechanism of diversification,mainly the regulation of excessive investment.The shortcoming of this paper is that when studying the discount effect of diversification,due to time factors,there are defects such as insufficient data,which may affect the empirical results.