Impact of Financial constraints on Fluctuate down to up of stock returns with Credit rating

Subject Areas : Journal of Investment Knowledge

zohreh Hajiha ¹ ( Associate Prof., Department of Accounting, Faculty of Humanities, East Tehran Branch, Islamic Azad University, Tehran, Iran. )
Aiob Ghorbani ² ( Aiob Ghorbani, MSc of Accounting at University of Qom, Qom, Iran )

Received: 2019-10-20 Accepted : 2020-01-07 Published : 2022-03-21

Keywords: Fluctuate down to up of stock returns, Financial Constraints, credit rating, Stock price crash risks,

Abstract :

The accumulation of bad news by management is a key factor in stock price crash risks. In addition, the ability to hide bad news by executives is restricted by the fact that if the amount of hiding exceeds this limit, then these bad news spillover and can lead to a stock price crash. The aim of current research was to survey the impact of financial constraints on fluctuate down to up of stock returns by emphasizing the moderator role of credit rating accepted companies in Tehran Stock Exchange. To implement such a research, 140 companies were selected during the period 2012 to 2017, and a combined data approach was used to test the research hypotheses. The results of the research indicate that the financial stock constraints have a positive and significant impact on fluctuate down to up of stock returns. Also, the results indicated that credit rating had significant impacts on the relationship of financial constraints with fluctuate down to up of stock returns. In other words, in companies with lower credit ratings, the relationship between financial constraints and stock price crash risk is more severe. In addition, the results of the sensitivity analysis (GMM method), has confirmed the results of the research. Finally, the findings indicate that the results have consistency with the representation theory.

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