Valentin Radu

Given the growing significance of the capital market, investors tend to steer clear of stock price crashes. This study aims to examine how idiosyncratic risk affects the likelihood of a stock price crash and how discretionary income smoothing affects the relationship between them. This study uses a data panel to empirically examine the hypothesis. This study uses a data panel to empirically examine the hypothesis, using 1,203 firm-year observations from non-financial companies publicly traded on the Indonesia Stock Exchange from 2019 to 2021. The results show that firms with greater idiosyncratic risk do not significantly generate higher stock price crash risk. Nevertheless, this study also discovered that managing discretionary income smoothing is essential to increasing the risk of crashes. The test shows that the coefficient of discretionary income smoothing is 0.153 and significant with a t-value of 2.104. Moreover, the investigations also indicate that greater use of discretionary income smoothing can amplify the impact of idiosyncratic risk on the likelihood of stock price crashes. This is shown from the results where the moderation of the two variables has a positive coefficient of 0.087 and is significant at 10% with a t-value of 1.446. Based on the findings, this study concludes that the presence of idiosyncratic risk by itself may not substantially impact the probability of stock market crashes. However, combined with discretionary income smoothing, it can worsen the potential negative consequences. It implies that how a firm reports its income can affect its susceptibility to stock price crashes.

Type of the article: Research Article

Abstract
Intangible assets play a significant role in the New Economy period we currently live in, yet their capitalization remains challenging due to high failure rates in innovation. The purpose of this study is to investigate the circumstances under which businesses have the potential to raise the future value of using their intangible assets. This study used publicly listed firms on the Indonesia Stock Exchange (IDX) from 2019 to 2024. The final sample comprises 1,974 firm-years that satisfy the selection criteria. A multiple regression analysis was carried out for the assessments. The findings show that the sole possession of intangible assets is insufficient to raise the value of the companies and explicitly shows a negative effect (coefficient = –0.1443, t-value = –2.406). However, the interaction tests reveal that to boost future excess returns, businesses possessing intangible assets are required to demonstrate earnings growth (coefficient = 0.0142, t-value = 2.388) and a strong price-to-book ratio (coefficient = 0.0627, t-value = 7.441). Furthermore, a sector-specific analysis reveals that these results diverge for the technology and healthcare sectors, where intangible assets fail to explain future excess returns (F-statistics = 3.912 and 8.299, respectively). This investigation suggests that the impact of intangible assets on firm value is not uniform; rather, it is contingent upon specific corporate financial fundamentals and industry contexts, proving that investors require validation of innovation through profitability and market strength.