Innovation information disclosure and stock price crash risk‐based supervision and insurance effect path analysis.

Because of the long cycle of innovation, more investment, high risk and other characteristics, Chinese innovative firms tend to have a higher degree of information asymmetry, leading to frequent stock price 'flash crashes'. This study investigates the impact of innovation information disclosure on stock price crash risk by examining the supervisory effect and insurance effect of innovation information disclosure for Growth Enterprises Market(GEM)‐listed firms in China from 2015 to 2019. We find that innovation information disclosure helps reduce firms' future stock price crash risk. The mechanism test finds that innovation information disclosure can exert both supervisory and insurance effects to reduce stock price crash risk. Specifically, after dividing innovation information disclosure into three categories: innovation advantage, content and risk disclosure, a vertical comparison reveals that the insurance effect of innovation advantage disclosure is more significant than the supervisory effect, while the opposite is true for innovation risk disclosure; a horizontal comparison reveals that the supervisory effect of innovation advantage, content and risk disclosure increases and the insurance effect decreases in order. The more types of innovation information disclosure, the more significant the effect of reducing stock price crash risk. Further analysis finds that the inhibitory effect of innovation information disclosure on stock price crash risk is stronger in firms with higher agency costs and higher innovation intensity in the industry. Our research has some insights into how to reduce the stock price crash risk of innovative companies in China. [ABSTRACT FROM AUTHOR]