Abstract
This paper analyses the relationship between competition (industry competition structure, market power, excessive size) and stock price crash risk in Chinese A-share listed companies. We find that (1) industry concentration or monopoly is positively related with stock price crash risk; (2) a balanced industry competition structure helps to mitigate stock price crash risk; and (3) excessive firm size (firm size adjusted by industry average) has moderating effects on the relation between market power and stock price crash risk. The empirical results of this study suggest that large companies should be prevented from using their market power to increase their monopoly so as to avoid competition imbalance.
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CLC codes: F832.5, F830.91
* The authors wish to thank the anonymous reviewer for his valuable suggestions; this paper has been improved substantially as a result of adopting these suggestions. The paper has also benefited from the expertise of Prof. Liping Xu from the Business School at Sun Yat-sen University, who provided important opinions for the Chinese and English versions of this paper. Any errors in the paper are the responsibility of the authors. The paper is supported by the National Natural Science Foundation of China (Project No. 71272201, 71372151, and 71231008).
1Yu Xin (corresponding author), PhD Supervisor, Professor, Business School and Center for Accounting, Finance and Institutions, Sun Yat-Sen University, email: mnsxy@mail.sysu.edu.cn; Xiaolong Gu, PhD candidate, Department of Finance and Investment, Business School, Sun Yat-Sen University, email: pawdragon@163.com; Tianyu Li, PhD candidate, Department of Finance and Investment, Business School, Sun Yat-Sen University, email: lty.suns@163.com.
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Xin, Y., Gu, X. & Li, T. Industry Competition Structure, Market Power, and Stock Price Crash Risk. China Account Financ Rev 17, 4 (2015). https://doi.org/10.7603/s40570-015-0004-z
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DOI: https://doi.org/10.7603/s40570-015-0004-z