The Effect of Financial Reporting Quality on the Relationship between Stock Price Crash Risk and Risk of litigation against the auditor
Subject Areas : • Emerging technology in the field of Accounting and its futureSamaneh Honar 1 , Esmaeil Akhlaghi Yazdi Nezhad 2
1 - Master of Accounting, Department of Accounting, Payame Noor University, Tehran, Iran.
2 - Assistant Professor, Department of Accounting, Hormozgan University, BandarAbbas, Iran.
Keywords: Stock Price Crash Risk, Auditor Liability Risk, Financial Reporting Quality.,
Abstract :
Objectives: The purpose of this study is to investigate the effect of financial reporting quality on the relationship between stock price crash risk and litigation risk against auditors.
Design/methodology/approach: This research utilizes multivariate regression to analyze the hypotheses. The statistical population of this study includes all firms listed on the Tehran Stock Exchange, with 131 firms selected using a systematic elimination sampling method. The study covers a period of 9 years, from 2014 to 2022.
Results: The testing of the first hypothesis revealed a direct and significant relationship between stock price crash risk and litigation risk against auditors. The second hypothesis demonstrated that financial reporting quality has a significant and inverse relationship with stock price crash risk and litigation risk against auditors. Additionally, financial reporting quality was found to have a significant and inverse relationship with litigation risk against auditors.
Innovation: This research provides evidence that stock price crash risk can increase auditors' litigation risk, and suggests that financial reporting quality can play a crucial role in this context.
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