Intangible Assets and Crash Risk: The Case of Low Intellectual Capital Firms in Indonesia

Abstract

This study explores how intangible assets affect crash risk in Indonesia as the representative of emerging markets, especially for low intellectual capital firms. We employ regression analysis to investigate the effect of intangible assets on crash risk in Indonesia. The findings suggest that firms with intangible assets are more vulnerable to crash risk. Our further investigations also find that intangible assets stimulate crash risk in low IC firms, but intangible assets cannot explain crash risk in high IC firms. This study implies that Indonesia’s low IC firms with intangible assets use explorative innovation strategies rather than exploitative strategies. This paper warns investors about the increasing crash risk of overvalued intangible assets and guides investors in anticipating future crashes. JEL Classifications: G11, G40, O31