An Empirical Study On Diversification And Stock Price Crash Risk

In recent years,due to the break of the capital chain and the difficulty of business integration,the phenomenon of non-advancement and retrogression of performance and even eventual bankruptcy has occurred from time to time.Market participants have certain doubts about whether diversified operations will have a positive or negative impact on the company.However,with the sluggishness of traditional industries,the continuous emergence of emerging industries,and the popularity of the real estate and financial investment industries,more and more companies are still joining the ranks of diversified operations.Whether it should be diversified is still a worth exploring topic.In addition,as the degree of market openness continues to deepen,more and more companies seek listings to achieve rapid financing,expand the size of enterprises,and strengthen the strength of enterprises.External investors are also competing to buy stocks for investment.It is an indispensable and important part of the stock market,but the situation of individual stocks plummeting and stock market turbulence still occurs frequently.How to determine whether an enterprise is worth investing and how to reasonably avoid the stock price crash riskes have become a worthing explore issue for investors.At present,the risk of stock market crash is mainly based on the theory of information cover caused by information asymmetry.Diversified companies have more business units,information flow,and timeliness of disclosure than those of specialized companies.It also provides managers with more motivation and opportunities to cover up bad news and implement cover-up behavior.Based on this consideration,this paper empirically tests the relationship between diversified operations and the stock price crash riskes around on the theory of information asymmetry.Based on the above analysis,this article selects the data of the A-share market from 2003 to2018 for empirical research,and draws the following conclusions: 1.stock price crash risk is significant increased when companies change from specialized operations to diversified operations;2.As the degree of diversification of the diversified operating company deepens,the stock price crash risk increases,that is,the degree of diversified operating and the stock price crash risk is positively correlated;3.Compared with state-owned enterprises,the degree of diversification in non-state-owned enterprises has a positive correlation with the stock price crash risk;4.Among companies with low external audit quality,diversification has a positive impact on the stock price crash risk,in companies with high external audit quality,diversification has no significant impact on the stock price crash risk;5.Among companies with low analyst coverage,diversification has a positive impact on the stock price crash risk,and in companies with high analyst coverage,diversification has no significant impact on the stock price crash riskes.This paper studies the impact of diversified operations on the risk of stock price plummeting from the perspective of diversified business strategys and the degree of diversification,which enriches the research on the consequences of diversified operations and broadens the scope of factors that affect diversification.This also provides a new direction for measures to stabilize the stock market and control the stock price crash riskes.