Narrative innovation disclosure and stock price crash risk: Evidence from Chinese listed firms

Using the 2012 revision of Guideline No. 2, we construct a difference-in-differences model to investigate the impact of narrative innovation disclosure on stock price crash risk among Chinese A-share listed firms from 2008 to 2020. We find that narrative innovation disclosure positively affects a firm 's crash risk. From the dual perspectives of the discloser and receiver, we reveal the mechanism. The strategic behaviors of firms with limited creativity, combined with investors ' challenges in fully comprehending innovations, contribute to increased information asymmetry and reduced the quality of disclosures, thereby rising stock price crash risks. Furthermore, we show that the impact of innovation disclosure on crash risk is more significant in firms operating within poor legal and market environments, and in those with overvalued stock prices. This study provides suggestions for improving the innovation disclosure system to reduce stock price crash risks and promote stability in capital markets for emerging countries.