ICT innovation, information environment and stock price crash risk: Evidence from patent data

Abstract

Information and communication technology (ICT) innovation has been widely implemented across numerous firms. Using patent information to measure ICT innovation, we find that firm's ICT innovation significantly reduces stock price crash risk. Our conclusion still holds after conducting endogeneity and robustness checks. We also find that this negative relationship is enhanced in less transparent information environments. Besides, the mechanism tests show that ICT innovation improves firm's internal control, reduces investor opinion divergence, and increases stock price informativeness, thus alleviating crash risk. Furthermore, the effect is more pronounced for firms in strong intellectual property protection and developed information infrastructure, particularly among high-technology firms. Our findings provide novel evidence for the consequences of ICT innovation from a financial perspective, which contributes to the understanding of mitigating stock price crash risk.