Concept tags and stock price crash risk
Xiren Zhang, Peilun Li, Songsheng ChenPurpose
This study examines the impact of market-driven concept tags in China's A-share market on firm-level stock price crash risk. We investigate whether the proliferation of concept tags enhances information transparency and strengthens external monitoring, or whether it instead amplifies speculative attention, noise trading and valuation distortions, thereby heightening the likelihood of future crash events.
Design/methodology/approach
We extract concept tags data through a customized web-scraping procedure and merge them with firm-level financial data to construct a panel dataset of Chinese A-share firms. The empirical analysis is based on fixed-effects models and is supported by a comprehensive set of robustness checks. To mitigate endogeneity concerns, we implement two-stage least squares estimation using instrumental variables. Mechanism tests and heterogeneity analyses are further conducted to identify the underlying channels and conditions of the documented effects.
Findings
Firms with more concept tags exhibit significantly higher subsequent stock price crash risk, and this relationship remains robust across multiple tests. Decomposition by tag type shows that policy-driven tags are positively associated with crash risk, whereas technology-driven tags are negatively associated with crash risk, highlighting the distinction between sentiment-driven and information-driven attention. Cross-sectional analyses show that the positive association is stronger in policy-priority industries and among firms with larger tradable market capitalization. Mechanism tests provide evidence consistent with three potential channels: enhanced noise trading, inflated valuation deviations and managerial information concealment through real earnings management. Additional heterogeneity analyses suggest that financially sound firms and high-growth firms may face stronger image-maintenance and expectation-management incentives, thereby amplifying the association between concept tags and crash risk.
Originality/value
To the best of the authors’ knowledge, this study provides one of the first systematic empirical analyses of market-driven concept tags in China and their implications for firm-level crash risk. The findings suggest that increased market attention does not uniformly improve governance. Under specific market and firm conditions, concept tags may amplify speculative attention, weaken information transparency and increase managers' incentives to delay unfavorable information disclosure. The study contributes to the literature on crash risk, attention economics and market narratives by showing that narrative-based classification systems can shape both investor behavior and firms' information environments.