ESG and stock price crash risk: role of financial constraints*

2021 ◽  
Author(s):  
JinCheol Bae ◽  
Xiaotong Yang ◽  
Myung‐In Kim
Keyword(s):  
Stock Price ◽  
Financial Constraints ◽  
Crash Risk

scholarly journals The Information Role of Earnings Conference Call Tone: Evidence from Stock Price Crash Risk

2019 ◽  
Author(s):  
Xi Fu ◽  
Xiaoxi Wu ◽  
Zhifang Zhang
Keyword(s):  
Stock Price ◽  
Predictive Power ◽  
Crash Risk ◽  
Conference Calls ◽  
Conference Call ◽  
Public Firms ◽  
Equity Incentives ◽  
Disclosure Tone

Abstract This paper investigates whether and how the disclosure tone of earnings conference calls predicts future stock price crash risk. Using US public firms’ conference call transcripts from 2010 to 2015, we find that firms with less optimistic tone of year-end conference calls experience higher stock price crash risk in the following year. Additional analyses reveal that the predictive power of tone is more pronounced among firms with better information environment and lower managerial equity incentives, suggesting that extrinsic motivations for truthful disclosure partially explain the predictive power of conference call tone. Our results shed light on the long-term information role of conference call tone by exploring the setting of extreme future downside risk, when managers have conflicting incentives either to unethically manipulate disclosure tone to hide bad news or to engage in ethical and truthful communication.

Foreign Investors, External Monitoring, and Stock Price Crash Risk

2019 ◽  
Vol 35 (4) ◽  
pp. 829-853
Author(s):  
Jeong-Bon Kim ◽  
Xiaoxi Li ◽  
Yan Luo ◽  
Kemin Wang
Keyword(s):  
Financial Reporting ◽  
Stock Price ◽  
Reporting Quality ◽  
Crash Risk ◽  
Accrual Quality ◽  
Foreign Investors ◽  
External Monitoring ◽  
Risk Reducing ◽  
Local Firms

We investigate whether foreign investors help to reduce local firms’ future stock price crash risk through their external monitoring. We find that the entrance of foreign investors is associated with a significant reduction in local firms’ future crash risk. Further investigation reveals that foreign investors help to improve local firms’ financial reporting quality from the perspectives of accrual quality, conservatism, and annual report tone management. The evidence is consistent with our conjecture that foreign investors play an important external monitoring role, which reduces managerial bad-news hoarding and thereby lowers local firms’ future crash risk. We also find that the crash risk–reducing role of foreign investors is more pronounced when foreign investors are more familiar with the institutional background of the host country, when they have stronger incentives to monitor local firms, and when local firms have higher governance efficacy. A variety of robustness checks reveals that our results are unlikely to be driven by potential endogeneity.

scholarly journals How Does the Accounting Conservatism Affect the Stock Price Crash Risk in Pakistan: The Complementary Role of Managerial and Institutional Ownership

2021 ◽  
Vol 7 (3) ◽  
pp. 607-621
Author(s):  
Aon Waqas ◽  
Danish Ahmed Siddiqui
Keyword(s):  
Stock Prices ◽  
Information Disclosure ◽  
Stock Price ◽  
Panel Data Analysis ◽  
Institutional Ownership ◽  
Accounting Conservatism ◽  
Crash Risk ◽  
Agency Conflicts ◽  
Complementary Role

Purpose: The conservatism of accounting and robustness of accounting information disclosure may restrain the irrational behavior of investors and help to reduce the risk of stock price crashes. This study aims to explore this in the context of developing country Pakistan. More specifically, this study investigates the effect of accounting conservatism on stock price crash risk. We also examine the complementary role of managerial and institutional ownership in strengthening this effect. Design/Methodology/Approach: This study conducts the panel data analysis of 155 nonfinancial firms listed in PSX from 2007 to 2019. This study calculates the C-Score to measure accounting conservatism. This study measures the firm’s stock price crash risk by calculating the DUVOL of weekly share prices. Findings: This study finds that there is a significant negative effect of accounting conservatism on firms’ stock price crash risk. This study also finds that managerial ownership enhances the stock price crash risk of the sample firms significantly as a moderator while there is no significant moderating influence of institutional ownership. Implications/Originality/Value: The competent authorities of Pakistan should consider agency conflicts. They should direct the firms’ management to share equal information in time regardless of whether the information is good or bad for stock prices.

Stock price crash risk: the role of systematic skewness

2021 ◽  
Vol 1 (1) ◽  
pp. 1
Author(s):  
Woraphon Wattanatorn ◽  
Chaiyuth Padungsaksawasdi
Keyword(s):  
Stock Price ◽  
Crash Risk

Does corporate tax aggressiveness explain future stock price crash? Empirical evidence from France

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Taher Hamza ◽  
Elhem ZAATIR
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Policy Implications ◽  
Crash Risk ◽  
Corporate Tax ◽  
Price Informativeness ◽  
Content Type ◽  
Tax Aggressiveness ◽  
The Impact

Purpose This study aims to examine the impact of corporate tax aggressiveness on future stock price crash. It also tests the corporate tax aggressiveness prediction power of the stock price crash via a long forecast window (two years). Design/methodology/approach The study sample consisted of 1,169 firm-years observations. The multivariate analysis uses three measures of stock price crash risk, as a dependent variable. The key variable is tax aggressiveness lagged by one period (one year) as all independent variables. As a robustness check, this paper uses alternate measures of earning management and a longer forecast window (two years) to predict stock price crash risk. Findings Tax aggressiveness activity is positively related to a firm-specific future stock price crash. Corporate tax aggressiveness predicts stock price crash risk for a long forecast window (two years). The findings are robust to a number of checks and have several policy implications. Practical implications Investors should be cautious about the different risks of corporate tax aggressiveness: stock price crash risk. The important role of firm disclosure which leads to more relevant stock price informativeness. Adopt accounting conservatism behavior. The market perceives a socially irresponsible behavior and may harm the firm reputation. Social implications Incentives for French regulators to reduce the feeling of injustice by SMEs vis-à-vis large international companies that have the possibility of transferring part of their profits to a country different from that where it should be taxed to reduce their tax bases. Originality/value French companies are among the heavily taxed in Europe which makes France a particularly suitable context for studying tax aggressiveness issues. The first in the French context, that document a significant and positive relation between tax aggressiveness and future crash risk. It focuses on the important role of corporate tax planning as a means of withholding bad news and its consequences in inflating stock prices.

scholarly journals Do corporate insiders trade on future stock price crash risk?

2020 ◽  
Author(s):  
Guanming He ◽  
Helen Mengbing Ren ◽  
Richard Taffler
Keyword(s):  
Stock Price ◽  
Financial Constraints ◽  
Crash Risk ◽  
Litigation Risk ◽  
Expected Payoff ◽  
Personal Gain ◽  
Corporate Insiders ◽  
Information Opacity ◽  
High Information

Abstract We explore whether firm managers trade on future stock price crash risk. This depends on managers’ ability to assess future crash risk, and on whether the expected payoff is greater than the expected costs associated with potential reputation loss and litigation risk. We find that insider sales are positively associated with future crash risk, which is consistent with managers’ trading on crash risk for personal gain. We also find that managers take advantage of high information opacity to pursue crash-risk-based insider sales more aggressively, but are less able to capitalize on this in the case of financial constraints or post-SOX.

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