Effect of Dividend Reduction and Corporate Tax Avoidance on Stock price crash risk (Negative skewness approach and low volatility approach)

Subject Areas : Journal of Investment Knowledge

parviz dindar farkoushy ¹ , Hossein Panahian ² , Hossein jabbari ³

1 - department of accounting and management ، Azad University of Kashan ،kashan،Iran
2 - Associate Professor، department of accounting and management ، Azad University of Kashan ،kashan،Iran
3 - Assistant Professor،department of Accounting and Management of Islamic Azad University of Kashan،iran

Received: 2020-02-26 Accepted : 2020-07-26 Published : 2022-12-22

Keywords: low to high volatility, Dividend reduction, Tax Avoidance, Stock Price Crash Risk, negative skew coefficient,

Abstract :

The purpose of this study is to investigate the effect of dividend reduction and corporate tax avoidance on the Stock price crash risk. Two measures of negative skewness coefficient and low to high volatility were used to measure the stock price crash risk. In this regard, the financial data of 131 companies during the period 2014-2019 have been extracted and analyzed by systematic elimination method as a statistical sample of research. Statistical analysis was performed using Eviews9 software at 95% confidence level and panel data and linear regression model were used to test the hypotheses. F-Limer (Chow) and Hausman statistics were used to determine how the regressions fit. The normality of the error distributions was evaluated by the Jarkue-Bera test, the residual independence was estimated by the Durbin-Watson statistic, and the test of variance by the Bartlett test. The results showed that there is no significant relationship between dividend reduction and the stock price crash risk according to both mentioned criteria in companies. Based on the results of the third hypothesis test (taking into account the first index of stock price risk), the ratio of independent directors intensified the direct relationship between the decrease in dividend yield and the Stock price crash risk. Finally, the level of tax avoidance is directly related to stock price crash risk in companies. This result shows that tax avoidance has led to the accumulation of bad news in the company, which with the disclosure of this news leads to a decrease in stock prices.

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