Accounting Conservatism and Stock Price Crash Risk : Firm-level Evidence
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review
Author(s)
Related Research Unit(s)
Detail(s)
Original language | English |
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Pages (from-to) | 412-441 |
Journal / Publication | Contemporary Accounting Research |
Volume | 33 |
Issue number | 1 |
Online published | 17 Nov 2014 |
Publication status | Published - Mar 2016 |
Link(s)
Abstract
Using a large sample of U.S. firms during 1964–2007, we find that conditional conservatism is associated with a lower likelihood of a firm's future stock price crashes. This finding holds for multiple measures of conditional conservatism and crash risk and is robust to controlling for other known determinants of crash risk and firm-fixed effects. Moreover, we find that the relation between conservatism and crash risk is more pronounced for firms with higher information asymmetry. Overall, our results are consistent with the notion that conditional conservatism limits managers’ incentive and ability to overstate performance and hide bad news from investors, which, in turn, reduces stock price crash risk.
Citation Format(s)
Accounting Conservatism and Stock Price Crash Risk: Firm-level Evidence. / KIM, Jeong-Bon; ZHANG, Liandong.
In: Contemporary Accounting Research, Vol. 33, No. 1, 03.2016, p. 412-441.
In: Contemporary Accounting Research, Vol. 33, No. 1, 03.2016, p. 412-441.
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review