Internet searching and stock price crash risk: Evidence from a quasi-natural experiment

In 2010, Google unexpectedly withdrew its searching business from China, reducing investors’ ability to find information online. The stock price crash risk for firms searched for more via Google before its withdrawal subsequently increases by 19%, suggesting that Internet searching facilitates inves...

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Bibliographic Details
Published in:Journal of financial economics Vol. 141; no. 1; pp. 255 - 275
Main Authors: Xu, Yongxin, Xuan, Yuhao, Zheng, Gaoping
Format: Journal Article
Language:English
Published: Amsterdam Elsevier B.V 01.07.2021
Elsevier Sequoia S.A
Subjects:
Business schools
Database searching
Financial economics
Financial management
Information processing
Information services
Internet
Internet searching
Internet stocks
Internet/Web search services
Investments
Investor behavioral bias
Investors
Online information services
Online searching
Online services
Prices
Prices and rates
Risk
Risk assessment
Search engines
Stock price crash risk
Stock prices
Stocks
Investor behavioral bias
G41
Information processing
Internet searching
G12
G14
Stock price crash risk
ISSN:0304-405X, 1879-2774
Online Access:Get full text
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Summary:In 2010, Google unexpectedly withdrew its searching business from China, reducing investors’ ability to find information online. The stock price crash risk for firms searched for more via Google before its withdrawal subsequently increases by 19%, suggesting that Internet searching facilitates investors’ information processing. The sensitivity of stock returns to negative Internet posts also rises by 36%. The increase in crash risk is more pronounced when firms are more likely to hide adverse information and when information intermediaries are less effective in assisting investors’ information processing. In addition, liquidity (price delay) decreases (increases) after Google's withdrawal.
Bibliography:ObjectType-Article-1
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ISSN:0304-405X
1879-2774
DOI:10.1016/j.jfineco.2021.03.003