Research on the Impact of Digital Mergers and Acquisitions on Stock Market Risk: Based on the Perspective of Stock Price Crash Risk

Deyang Zheng

doi:10.63313/EBM.9143

Authors

Deyang Zheng School of Finance, Northwest Normal University, Lanzhou 730070, China Author

DOI:

https://doi.org/10.63313/EBM.9143

Keywords:

Digital Mergers and Acquisitions, Digitalization, Stock Price Crash Risk, Financing Constraints

Abstract

Digital Mergers and Acquisitions (DMA) represent a strategic approach for enterprises to acquire digital assets and capabilities. Existing research primarily focuses on the impact of DMA on innovation and financial performance, with insufficient exploration of its effects on capital market risk, particularly stock price crash risk. This study aims to investigate whether and how DMA can mitigate the risk of stock price crashes in firms. Using a sample of A-share listed companies in China from 2012 to 2023 and employing a multi-period Difference-in-Differences (DID) model, this paper empirically examines the impact of DMA on stock price crash risk and its underlying mechanisms. The results show that: (1) Compared to firms conducting non-digital M&A, firms implementing DMA significantly reduce their future stock price crash risk. This conclusion remains robust after a series of endogeneity controls and robustness tests. (2) Mechanism analysis reveals that DMA mitigates stock price crash risk by alleviating corporate financing constraints. (3) Heterogeneity analysis indicates that the risk-reducing effect of DMA is more pronounced in state-owned enterprises and firms located in the eastern region of China. This study enriches the literature on the economic consequences of DMA and provides empirical evidence for corporate digital transformation strategies and market risk regulation.

References

[1] Dong, B. R., Xu, H. N., & Wang, J. H. (2022). Corporate Digital Strategy Commitment and Stock Price Crash Risk. Accounting Research, (9), 112-126. (In Chinese)

[2] Hadlock, C. J., & Pierce, J. R. (2010). New Evidence on Measuring Financial Constraints: Moving Beyond the KZ Index. The Review of Financial Studies, 23(5), 1909-1940.

[3] Jin, L., & Myers, S. C. (2006). R2 around the World: New Theory and New Tests. Journal of Financial Economics, 79(2), 257-292.

[4] Li, J. J. (2020). The Unintended Consequence: Why Do M&A Performance Commitments Exacerbate Stock Price Crash Risk? Accounting Research, (4), 37-44. (In Chinese)

[5] Wang, W. J., Fu, C., & Fu, D. G. (2017). Is M&A Goodwill a Precursor Signal of Stock Price Crash? From the Perspective of Accounting Function and Financial Security. Journal of Finance and Economics, 43(9), 76-87. (In Chinese)

[6] Wu, F., Hu, H. Z., Lin, H. Y., et al. (2021). Corporate Digital Transformation and Capital Market Performance: Empirical Evidence from Stock Liquidity. Management World, 37(7), 130-144+10. (In Chinese)

[7] Xu, N. X., Yu, S. Y., & Yi, Z. H. (2013). Institutional Investor Herding Behavior and Stock Price Crash Risk. Management World, (7), 31-43. (In Chinese)

[8] Yang, W., Song, M., & Feng, K. (2018). M&A Goodwill, Investor Overreaction, and Stock Price Bubble and Crash. China Industrial Economics, (6), 156-173. (In Chinese)

[9] Zong, Q. Y., Zhu, Z. G., & Guo, J. (2023). The Impact of Digital Technology Application on Stock Price Crash Risk: Supervision Effect and Information Effect. Finance and Economics, (4), 68-71. (In Chinese)