Data empowerment and crash risk

This study defines data empowerment as a firm’s realized capability to strategically manage and apply data throughout its lifecycle–underpinned by robust governance and advanced analytics–to enhance decision-making and risk management. Examining its impact on stock price crash risk using Chinese listed company sample, our empirical analysis demonstrates data empowerment significantly reduces crash risk. Mechanism analysis reveals that this risk alleviation occurs through three key channels: lowering cash flow volatility, constraining excessive debt, and boosting productivity. Furthermore, we find that data empowerment functions primarily as a governance tool, rather than a core business driver, enabling firms to enhance oversight and strategic planning to curb crash risk. We also find that companies in the eastern region and larger firms benefit more from data empowerment. These findings underscore the buffering effect of data empowerment in corporate finance and suggest that embedding data-driven practices into governance frameworks can bolster financial stability.