Deviant Strategy, Internal Control, and Stock Price Crash Risk: An Empirical Study from Panel Data of A-Listed Companies in China Based on Fixed Effect Models

As the growing number of listed companies over the years, stock plunge has occurred more frequently than ever before. This study examined the impacts of deviant strategy on stock price crash risk and the role of internal control between the two elements. We did the experimental analysis based on China A-listed companies over 2010–2020. STATA 17 was used to deal with data processing, fixed effect regression model and robust test. After dropping some special variables and winsorizing all the observations at the top and bottom 1%, we finally got 21039 variables. We chose six-factor model as the symbol for deviant strategy (independent variable), DIB index as the token for internal control (independent variable), and two methods to measure the risk of stock price rash risk (dependent variable). We found robust evidence that different corporate strategy is positively associated with stock price crash risk. We also found that higher levels of internal control can reduce the risk of stock price crisis. Furthermore, higher quality of internal control can alleviate the positive relationship between deviant strategy and the risk of stock price crash risk. We did robust regression model test with alternative variables, and our main models still remained tenable.