Abstract
We study the influence of the innovations, proxied by the number of patent grants and citations as well as the R&D investments on the stock price crash risk. Using a large sample of U.S. firms, we show that the innovation related activities reduce the likelihood to experience future stock price crashes with significant magnitude. This finding is consistent with the argument that the innovations facilitate information dissemination and decrease the probability of hoarding negative news. Further, we find that such influence on stock price crash risk is more pronounced for firms with weak external monitoring mechanism and high information asymmetry.
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