Abstract:

Previous studies on stock price crash risk generally believed that stock price crash is caused by the concentrated outbreak of “bad news” hidden by insiders. However， if investors sell their stocks because of panic sentiments， it will also cause the stock price to crash. The occurrence of natural disasters will panic investors， and impact of disasters cannot be accurately evaluated in a short time. Investors may sell stocks because of loss aversion. Typhoon as a frequent natural disaster， the panic caused by it may be transmitted to the capital market， causing a series of reactions in the capital market. Therefore， how typhoon disasters affect asset pricing and crash risk may be a very important issue. At the same time， a large number of innovative firms have gathered in the southeast coastal areas of China， but whether the technological competitiveness can effectively resist the impact of typhoon damage on the stock price crash is also a worthy question. Finally， whether allocates resources appropriately can alleviate the impact of Typhoon on the stock price crash. But， now， the research on these questions is relatively rare.Concerning the above issues， according to the prospect theory， it is argued that the destruction of the company's property and public facilities by typhoon will make investors panic， and then lead to crash by selling stocks. Therefore， typhoon damage has a positive correlation with crash risk. There is a complementary relationship between the core competitiveness formed by technological innovation and the fixed assets of enterprises. The destruction of fixed assets by typhoon makes the value of knowledge assets unable to work. Therefore， knowledge assets positively regulate the relationship between typhoon damage and crash risk. Financial flexibility can help enterprises cope with risks better， so it negatively regulates the relationship between typhoon destruction and crash risk.To test the hypothesis， a linear regression model is constructed for empirical analysis. The explained variable is crash risk. And negative skewness and down-to-up volatility estimated by firm-special daily returns are the measure of crash risk. The explanatory variable is the maximum of typhoon damage index of the city where the listed company is located based on the wind field model. And the control variables include a series of financial indicators and stock trading indicators of the companies. In addition， to analyze the moderating effects of knowledge assets and financial flexibility the product term of patent quantity and typhoon damage index and the product term of operating cash flow ratio and typhoon damage index are added into regression model. The sample of empirical research is 23，674 firm-year observations from 3，509 listed firms in in Shanghai and Shenzhen stock markets during the period 2010-2019. According to the above empirical model， this paper uses OLS model to make regression analysis on the sample data. The results indicate that the greater the damage of typhoon to listed companies the greater stock price crash risk. The knowledge assets intensify the impact of typhoon damage on crash risk. And financial flexibility can effectively alleviate the impact of typhoon damage on crash risk. In order to ensure the reliability of the research results and correct the possible endogenous problems in the regression model， the minimum distance between listed companies and typhoon center in that year is selected as the instrumental variable and two-stage least squares regression is used. The consistent conclusion is obtained.Compared with the previous studies which only focus on the impact of major sudden natural disasters on the firms’ property， for the first time frequent typhoon disasters are brought into the capital market risk analysis and further the explanatory power of prospect theory is expanded. In practice， the results of this paper can be used for reference to objectively evaluate the relationship between natural disasters and capital market risk， and improve the ability of firms and investors to deal with natural disasters.

Key words: stock price crash risk, typhoon disasters, knowledge assets, financial flexibility