Business strategy and stock price crash risk: international evidence

Employing a large international sample spanning from 1985 to 2017 (i.e. 65,774 firm-year observations), this paper examines the relationship between business strategy and stock price crash risk. Empirical results suggest that prospective business strategy is significantly and positively related to stock price crash risk, in line with the 'bad news hoarding hypothesis'. Further research shows that in companies with higher information asymmetry or more overconfident CEOs, prospective business strategy has a larger positive impact on stock price crash risk. In addition, the above positive effects are more significant in countries with higher individualism, lower power distance, and weaker uncertainty avoidance. Our results remain after a battery of robustness checks.