Investigating the Relationship between Conservative and Negative Skewness of Stock Returns with Emphasis Debt Maturity in the Life Cycle

Subject Areas : Financial Knowledge of Securities Analysis

Mohammad Hossein Asadi Moshizi ¹ , Zohreh Hajiha ² , Sayedeh Mahboubeh Jafari ³

1 - Department of Accounting, Kish International Branch, Islamic Azad University, Kish Island, Iran
2 - Associate Professor Department of Accounting, East Tehran Branch, Islamic Azad University, Tehran, Iran
3 - Assistant Professor Department of Accounting, South Tehran Branch, Islamic Azad University, Tehran, Iran

Received: 2021-06-12 Accepted : 2021-06-12 Published : 2021-05-22

Keywords: Conservatism, Debt Maturity, Negative skewness of stock ret, Stock Price Crash Risk,

Abstract :

The purpose of this study is to investigate the relationship between conservatism and stock price crash risk with emphasis on debt maturity in the life cycle of companies listed in Tehran Stock Exchange. For this purpose, the financial statements of 106 companies were collected during the period 2011-2017. Multivariate regression with combined data was used to test the hypotheses. The Givoly & Hayn criteria were used for conservatism and the negative skewness criterion was used to stock price crash risk. The findings of the first hypothesis test suggest that there is a relationship between accounting conservatism and the stock price crash risk. In other words, conservative practices will reduce the stock price crash risk. The findings of the second hypothesis test also suggest that debt maturity has a moderating role on the relationship between accounting conservatism and stock price crash risk. In the life cycle stages, the above hypotheses were confirmed in the maturity and growth stages. In other words, conservatism reduces the likelihood of bad news coming into the market, thereby reducing the stock price crash risk. Debt maturity also increases the ability of conservatism to reduce the stock price crash risk.

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