Article

China Accounting and Finance Review

, 17:4

First online:

Open Access This content is freely available online to anyone, anywhere at any time.

Industry Competition Structure, Market Power, and Stock Price Crash Risk

  • Yu XinAffiliated withSun Yat-Sen University Email author 
  • , Xiaolong GuAffiliated withDepartment of Finance and Investment, Business School, Sun Yat-Sen University
  • , Tianyu LiAffiliated withDepartment of Finance and Investment, Business School, Sun Yat-Sen University

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.

Keywords

Stock Price Crash Risk Herfindahl-Hirschman Index Lerner Index Competition Structure Market Power Excessive Size