Research On The Relationship Between Diversified Operations And Stock Price Crash Ris

In recent years,the global stock market crash has occurred frequently,which not only brings about investors’ enormous property damage but also has a certain influence on public companies and the monetary and financial system,which is hindering the stable and healthy development of capital markets,preventing systemic financial risks is crucial to the stable development of Chinese capital market.Therefore,how to avoid a stock crash has become a hot topic in academia and practice.A stock price crash is mainly caused by information asymmetry and agency problems,which lead to the accumulation of negative news inside the enterprise.Diversification is very common in public companies in China.Diversification runs through the whole process of enterprise operation and has an important impact on information asymmetry.Theoretically,on the one hand,diversification disperses business risks,reduces earnings volatility and cash holdings,alleviates information asymmetry,and inhibits the generation and accumulation of negative news;on the other hand,diversification leads to complex organizational structures,cross-sectoral subsidies,and pyramid ownership structures,aggravating information asymmetry and increasing the accumulation of negative news.Therefore,diversification has both positive and negative effects on stock price crash risk.This paper is of interest in studying the relationship between diversification and the risk of stock price collapse from the perspective of analyst coverage.Based on the perspective of securities analyst coverage,this paper takes the data of Chinese A-share diversified companies from 2008 to 2020 as samples for empirical research.The results show that diversification significantly suppresses the risk of stock price collapse,and the mechanism test finds that analyst coverage plays a partial mediating effect.This paper also uses a series of robustness tests,and the results are still obvious,which proves the accuracy of the results.In addition,this paper further finds that:compared with high CEOs’ career concerns,diversified companies with low CEOs’ career concerns have more obvious effect on inhibiting stock price crash risk;compared with companies with absolute concentration of equity,diversified companies with non-equity concentration restrain the risk of stock price crash more obviously;compared with companies with low quality of information,diversified companies with high quality of information have a more obvious effect on inhibiting stock price crash risk.From the point of view of securities analysts,this article makes an empirical study of the impact of corporate diversification on the risk of stock price crash.It not only expands the research on the drivers of stock price collapse risk and the economic consequences of diversification,but also provides reference suggestions for listed companies,investors,and regulators to prevent and control the risk of stock price crash.