The relationship between Conditional conservatism of accounting and The Stock Price Crash Risk
The relationship between Accounting Conservatism and The Stock Price Crash Risk
Subject Areas : Financial Knowledge of Securities Analysis
Omid Farhad Touski 1 , Rahman doostian 2
1 - Assistant Professor Department of Accounting, Khorramabad Branch, Islamic Azad University, Khorramabad, Iran
2 - Assistant Professor Department of Accounting, Khorramabad Branch, Islamic Azad University, Khorramabad, Iran.(* Corresponding author)
Keywords: accounting conservatism, Stock price crash risk, stock return skewness measure, stock return volatility measure,
Abstract :
The main purpose of this research is to investigate the relationship between accounting conservatism and the Stock price crash risk in 25 banks from among the banks listed to the Tehran Stock Exchange during the period from 2010 to 2019. The independent variable of conservatism in accounting has been measured by the model of Khan and Watts (2009) and to measure the dependent variable of the Stock price crash risk, two measures of the negative coefficient of skewness of stock returns and the inverse volatility of stock returns have been used. The research method is of correlation type and multivariate regression is used using combined data with integrated regression model approach. The research findings show that there is a negative and significant relationship between the variable of conservatism in accounting and the measure of negative skewness of stock returns, and there is a negative and significant relationship between conservatism in accounting and the measure of inverse volatility of stock returns. Since conditional hedging limits managers' opportunistic behavior (quick release of good news and not disclosing bad news), it is expected that banks will experience less stock price crash risk by adopting conservative accounting practices.