The Relationship between Managerial talent, Investment Efficiency and Stock Price Crash Risk
Subject Areas : Business Management
Bita Moazen
1
,
Yunes Bad Avar Nahandi
2
1 - دانشگاه ازاد واحد تبریز
2 - دانشیار گروه حسابداری، واحد تبریز، دانشگاه آزاد اسلامی، تبریز، ایران
Keywords: Financial Reporting Quality, Managerial talent, Investment Efficiency, stock price Crash risk,
Abstract :
The aim of the present study was to investigate the relationship between managerial talent, investment efficiency, and also, the management ability interaction and financial reporting quality with stock price crash risk. To this end, the data from 124 companies accepted on the Stock Exchange in Tehran were used for a span of five years (2009-2014). To measure managarial talnet, Demirchian & et al. (2012) model, which was based on accounting variables; Chen & et al. (2011) model, to measure investment efficiency; Kothari & et al. (2005) model, to measure financial reporting quality; Chen & et al. (2001) model, to measure stock price crash risk were used. To test the hypotheses, the multiple regression statistics was used. The results confirmed the theory of rent extraction and showed that firms with more talented managers making inefficient investment decisions. these firms, take opportunistic approach and manupulate financial reports in order to hid bad news to increase stock price crash risk.
Ahmadpour, A., Zare Behnamiri, M. J., & Heidari Rostami, K. A. (2014). Investigation the effect of firm’s characteristics on future Crash risk of Stock Price. Stock Exchange Quarterly, 28, 29-45, (In Persian).
Ahsan, H. (2014). Managerial talent, investment efficiency and stock price crash risk. School of Accountancy. Massey University New Zeland.
Azar, A., & Momeni, M. (2004). Statistics & it’s application in management. Samt pub, (In Persian).
Badavar Nahandi, Y., Ghaderi, S., & Beheshti Nahandi, R. (2013). The effect of accounting information transparency on investment inefficiency among firms listed at Tehran stock exchange. Economic Researches & Policies Quarterly, 68, 65-82, (In Persian).
Badavar Nahandi, Y., & Taghizadeh khangah, V. (2013). The relationship between audit quality and investment efficiency. The Accounting & Auditing Review Quarterly, 2,19-42, (In Persian).
Biddle, G. C., Hilary, G., & Verdi, R. S. (2009). How does financial reporting quality relate to investment efficiency?. Journal of Accounting and Economics, 48(2), 112-131.
Chen, F., Hope, O. K., Li, Q., & Wang, X. (2011). Financial reporting quality and investment efficiency of private firms in emerging markets. The Accounting Review, 86(4), 1255-1288.
Chen, J., Hong, H., & Stein, J. C. (2001), Forecasting crashes: trading volume, past returns, and conditional skewness in stock prices. Journal of Financial Economics, 61(3), 345-381.
Demerjian, P., Lev, B., Lewis, M., & McVay, S. (2013). Managerial ability and earnings quality. The Accounting Review, 88(2), 463-498.
Demerjian, P., Lev, B., & MacVay, S. (2012).Quantifying managerial ability: a new measure and validity test. Management Science, 58(7), 1229-1248.
Ebrahimzadeh Tarani, E. (2012). Investigation the effect of management ability on earnings quality among firm’s listed at Tehran stock exchange, Master thesis, Payam nour University of Behshahr, (In Persian).
Foulad, F., & Yaghoub nezhad, A. (2012). Conservatism and decrease of stock price crash risk. The Accounting & Auditing Review Quarterly, 3, 99-118, (In Persian).
Froughi, D., Amiri, H., & Mirzaee, M. (2011), The effect of financial information opacity on future crash risk of stock price aamong firm’s listed at Tehran stock exchange, Finanal Accounting Researches Quarterly, No.4, pp.15-40, (In Persian).
Francis, J., Huang, A. H., Rajgopal, S., & Zang, A. Y. (2008). CEO Reputation and earnings quality. Contemporary Accounting Research, 25(1), 109-147.
Francis, B., Sun, X., & Wu, Q. (2013). Managerial ability and tax avoidance: evidence from Korea. Working Paper, Rensselaer Polytechnic Institute, 449-477.
Hutton, A. P., Marcus, A. J., & Tehranian, H. (2009). Opaque financial reports and crash risk. Journal of Financial Economics, 94(1), 67-86.
Hajiha, Z., & Gheilavi, M. (2012). Using DEA ttechnique for measuring efficieny of manufacturing firm’s listed at Tehran stock exchange by using financial reporting based model. Financial Engineering and Security Management Quarterly, 12, 111-130, (In Persian).
Jin, L., & Myers, S. C. (2006). R2 around the world: new theory and new tests. Journal of Financial Economics, 79(2), 257-292.
Khodaee Valezaghrod, M., & Yahyaee, M. (2010). The relation between financial reporting quality and investment efficiency at Tehran stock exchange. Management accounting quarterly, 5, 1-15, (In Persian).
Kothari, S. P., Leone, A. J., & Wasley, C. E. (2005). Performance matched discretionary accrual measures. Journal of Accounting and Economics, 39(1), 163-197.
Modarres, A., & Hesarzadeh, R. (2008). Financial reporting quality and investment efficiency. Stock Exchange Quarterly, 2, 85-116.
Omidi, F. (2011). The effect of accruals quality on investment efficiency among firm’s listed at Tehran stock exchange. Master thesis. Esfahan University, Iran, (In Persian).
Piri, P., Didar, H., & khodayar Yeghaneh, S. (2014). Investigation the effect of management ability on financial reporting quality in life cycle stages of firm’s listed at Tehran stock exchange. Financial Accounting Researches Quarterly, 3, 99-118, (In Persian).
Shahini, M. (2013), Stock markets crash. Master thesis. Kharazmi University, Iran, (In Persian).
Sayyadi, S., Mohammadi, M., & Nikpour, A. (2011). Talent management: a key concept at organization. Work and Society Monthly, 135, 82-86, (In Persian).
Saghafi, A. Boolou, G., & Mohammadian, M. (2011). Accounting information quality, overinvestment, and free cash fiow. Advances in accounting Quarterly, 2, 37-62, (In Persian).
Verdi, R. S. (2006). Financial reporting quality and investment efficiency. Working paper. MIT University, 1-54.
_||_Ahmadpour, A., Zare Behnamiri, M. J., & Heidari Rostami, K. A. (2014). Investigation the effect of firm’s characteristics on future Crash risk of Stock Price. Stock Exchange Quarterly, 28, 29-45, (In Persian).
Ahsan, H. (2014). Managerial talent, investment efficiency and stock price crash risk. School of Accountancy. Massey University New Zeland.
Azar, A., & Momeni, M. (2004). Statistics & it’s application in management. Samt pub, (In Persian).
Badavar Nahandi, Y., Ghaderi, S., & Beheshti Nahandi, R. (2013). The effect of accounting information transparency on investment inefficiency among firms listed at Tehran stock exchange. Economic Researches & Policies Quarterly, 68, 65-82, (In Persian).
Badavar Nahandi, Y., & Taghizadeh khangah, V. (2013). The relationship between audit quality and investment efficiency. The Accounting & Auditing Review Quarterly, 2,19-42, (In Persian).
Biddle, G. C., Hilary, G., & Verdi, R. S. (2009). How does financial reporting quality relate to investment efficiency?. Journal of Accounting and Economics, 48(2), 112-131.
Chen, F., Hope, O. K., Li, Q., & Wang, X. (2011). Financial reporting quality and investment efficiency of private firms in emerging markets. The Accounting Review, 86(4), 1255-1288.
Chen, J., Hong, H., & Stein, J. C. (2001), Forecasting crashes: trading volume, past returns, and conditional skewness in stock prices. Journal of Financial Economics, 61(3), 345-381.
Demerjian, P., Lev, B., Lewis, M., & McVay, S. (2013). Managerial ability and earnings quality. The Accounting Review, 88(2), 463-498.
Demerjian, P., Lev, B., & MacVay, S. (2012).Quantifying managerial ability: a new measure and validity test. Management Science, 58(7), 1229-1248.
Ebrahimzadeh Tarani, E. (2012). Investigation the effect of management ability on earnings quality among firm’s listed at Tehran stock exchange, Master thesis, Payam nour University of Behshahr, (In Persian).
Foulad, F., & Yaghoub nezhad, A. (2012). Conservatism and decrease of stock price crash risk. The Accounting & Auditing Review Quarterly, 3, 99-118, (In Persian).
Froughi, D., Amiri, H., & Mirzaee, M. (2011), The effect of financial information opacity on future crash risk of stock price aamong firm’s listed at Tehran stock exchange, Finanal Accounting Researches Quarterly, No.4, pp.15-40, (In Persian).
Francis, J., Huang, A. H., Rajgopal, S., & Zang, A. Y. (2008). CEO Reputation and earnings quality. Contemporary Accounting Research, 25(1), 109-147.
Francis, B., Sun, X., & Wu, Q. (2013). Managerial ability and tax avoidance: evidence from Korea. Working Paper, Rensselaer Polytechnic Institute, 449-477.
Hutton, A. P., Marcus, A. J., & Tehranian, H. (2009). Opaque financial reports and crash risk. Journal of Financial Economics, 94(1), 67-86.
Hajiha, Z., & Gheilavi, M. (2012). Using DEA ttechnique for measuring efficieny of manufacturing firm’s listed at Tehran stock exchange by using financial reporting based model. Financial Engineering and Security Management Quarterly, 12, 111-130, (In Persian).
Jin, L., & Myers, S. C. (2006). R2 around the world: new theory and new tests. Journal of Financial Economics, 79(2), 257-292.
Khodaee Valezaghrod, M., & Yahyaee, M. (2010). The relation between financial reporting quality and investment efficiency at Tehran stock exchange. Management accounting quarterly, 5, 1-15, (In Persian).
Kothari, S. P., Leone, A. J., & Wasley, C. E. (2005). Performance matched discretionary accrual measures. Journal of Accounting and Economics, 39(1), 163-197.
Modarres, A., & Hesarzadeh, R. (2008). Financial reporting quality and investment efficiency. Stock Exchange Quarterly, 2, 85-116.
Omidi, F. (2011). The effect of accruals quality on investment efficiency among firm’s listed at Tehran stock exchange. Master thesis. Esfahan University, Iran, (In Persian).
Piri, P., Didar, H., & khodayar Yeghaneh, S. (2014). Investigation the effect of management ability on financial reporting quality in life cycle stages of firm’s listed at Tehran stock exchange. Financial Accounting Researches Quarterly, 3, 99-118, (In Persian).
Shahini, M. (2013), Stock markets crash. Master thesis. Kharazmi University, Iran, (In Persian).
Sayyadi, S., Mohammadi, M., & Nikpour, A. (2011). Talent management: a key concept at organization. Work and Society Monthly, 135, 82-86, (In Persian).
Saghafi, A. Boolou, G., & Mohammadian, M. (2011). Accounting information quality, overinvestment, and free cash fiow. Advances in accounting Quarterly, 2, 37-62, (In Persian).
Verdi, R. S. (2006). Financial reporting quality and investment efficiency. Working paper. MIT University, 1-54.