To Study The Effect of Investor Protection on Future Stock Price Crash Risk

محورهای موضوعی : Financial Accounting

Hassan Valian ¹ (Department of Accounting, Shahrood Branch, Islamic Azad University, Shahrood, Iran.)
Fatemeh Jalali ² (Faculty of Economic & Management, Semnan University , Semnan, Iran.)
Mehdi Darvishan ³ (Department of Accounting, Shahrood Branch, Islamic Azad University, Shahrood, Iran.)
Mohamad Mehdi Mohamadi ⁴ (Department of Accounting, Shahrood Branch, Islamic Azad University, Shahrood, Iran.)

تاریخ دریافت : 1398/06/11 تاریخ پذیرش : 1399/05/27 تاریخ انتشار : 1400/01/12

کلید واژه: Investor protection, Corporate Governance, Future Stock Price Crash Risk,

چکیده مقاله :

Managers are responsible for providing financial statements and they might try to make a good picture of their firm's conditions. Therefore, they try to delay the disclosure of bad news and release the good news as soon as possible. The ten-dency of managers toward hiding bad news increases the stock price crash risk. The protection of investor is one of the factors that can prevent from falling stock price, because it restricts the managers and majority shareholders in frauding and hiding bad news. Thus, the main purpose of the present research is to study the effect of investor protection on future stock price crash risk. In this research, 89 companies from listed companies in Tehran Stock Exchange during 2011-2017 were tested. The results obtained from the research's hypothesis test showed that protecting the rights of investors has a negative effect on the stock price crash risk. In fact it can be concluded that with the increase of the investor protection, the firms are obligated to disclose the high-quality accounting information and present more transparent financial reporting, as a result, the information asym-metry will be reduced and by creating a flow of information between the manag-ers and the investors and thus failure to accumulate bad news in the company, the risk of the stock price crash will be also reduced.

منابع و مأخذ:

[1] Safarzade, M.H, The impact of observing investors' rights on profit quality, Experimental
Research of Accounting, 2013, 3(9), P.147-172, (in Persian).

 

[2]   Larrain,  B., Tapia,  M., and Urzúa I., F.,  Investor protection and corporate control, Journal of Corporate Finance, 2017, 47, P.174–190. Doi:10.1016/j.jcorpfin.2017.09.002.

 

[3]  Nataj, Gh., Momenzade, M.M., and Momenzade, M.H.,  Development and empowerment of the capital market to realize the objectives of resistance economy ( with the emphasis on protection of minority shareholder rights), Accounting and Audit research, 2018, 39, P.75-92, (in Persian).

 

[4]  Zhang, H., Wang, M., and Jiang, J.,  Investor protection and stock crash risk, Pacific-Basin Finance Journal, 2017, 43, P. 256–266. Doi: 10.1016/j.pacfin.2017.05.001.

 

[5]  Vaez, S.A., and Dorse, S.S.,  To study the effect of the auditor's expertise in industry on relationship between the lack of transparancy of financial statements and the stock price crash risk, Accounting and Audit research, 2018, 39,  P.111-132, (in Persian).

 

[6]  Malekian, E., Fakhari,  H.,  Ghasemi,  J.,  and Farzad, S.,   Predict the Stock Price of Crash Risk by Using Firefly Algorithm and Comparison with Regression,  Advances in mathematical finance & applications, 2018, 3(2), P.43-58. Doi:10.22034/amfa.2018.540830.

 

 [7]  Bleck, A., and Liu, X.,  Market transparency and the accounting regime,  Journal of Accounting Research, 2007, 45(2),  P.229-256. Doi:10.1111/j.1475-679X.2007.00231.x.

 

[8]  Kim, J.B., and Zhang, L., Does accounting conservatism reduce stock price crash risk? Firm-level evidence,  Contemporary Accounting Research, 2016, 33(1), P.412-441. Doi:10.1111/1911-3846.12112

 

[9]  Hutton, A.P., Marcus, A.J., and Tehranian, H., Opaque financial reports, R2, and crash risk”,  Journal of Financial Economics, 2009,  94(1),  P.67-86. Doi:10.1016/j.jfineco.2008.10.003.

 

[10]  Davoodi Kasbi, A., Dadashi,  I., and Azinfar, K., Stock Price Prediction Using the Chaid Rule-Based Algorithm and Particle Swarm Optimization (PSO), Advances in Mathematical Finance & Applications,  2020,  5(2),  P.197-213. Doi: 10.22034/amfa.2019.585043.1184.  

 

 

[11]  Froghi, D., and Mirzayee, M., The effect of conditional consevatism of accounting on future stock price crash risk in the companies listed in Tehran Stock Exchange, Journal of Accounting advancments, 2012, University of Shiraz, 4(2), P. 77-117. Doi: 10.22099/jaa.2012.1729. (in Persian).

 

[12] Robin,  A.J., and Zhang, H., Do Industry-Specialist Auditors Influence Stock Price Crash Risk?, AUDITING: A Journal of Practice & Theory, 2015, 34(3),  P.47-79. Doi:10.2308/ajpt-50950.

 

[13]  Pasandideh Parsa, B., and Sarraf,  F.,   Financial Statement Comparability and the Expected Crash Risk of Stock Prices, Advances in mathematical finance & applications, 2018, 3(3), P.77-93. Doi: 10.22034/amfa.2018.544951.

 

[14]  Habib, A., Hasan, M. M., and Jiang, H., Stock price crash risk: review of the empirical literature, Accounting & Finance, 2017, 58(51), P. 211-251. Doi:10.1111/acfi.12278.

 

[15]  Liao, Q., The Stock Price Crash Risk Prediction by Neural Network,  Accounting and Finance Research, 2016, 5(2), P.61-70. Doi:10.5430/afr.v5n2p61.

 

[16]  Jin, L., and Myers, S.C., R² around the world: new theory and new tests,  Journal of Financial  Economic, 2006, 79(2), P. 257–292. Doi: 10.3386/w10453.

 

[17]  Benmelech, E.,  Kandel, E., and Veronesi, P., Stock-based compensation and CEO (dis) incentives,  The Quarterly Journal of Economics, 2010, 125(4), P.1769–1820. Doi:10.1162/qjec.2010.125.4.1769.

 

[18]  Froghi, D., Amiri, H., and Mirzayee, M., The effect of the lack of transparancy in financial information on future stock price crash risk in the companies listed in Tehran Stock Exchange, Financial Accounting Research, 2011, 4(10), P.15-40, (in Persian).

 

[19]  Kim, J.B., Li, Y., and Zhang, L., Corporate Tax Avoidance and Stock Price Crash Risk: Firm-Level Analysis,  Journal of Financial Economics, 2011, 100, P.639–662. Doi:10.1016/j.jfineco.2010.07.007.

 

[20]  L.Callen, J.,  and Fang, X., Institutional Investors and Crash Risk: Monitoring or Expropriation?, 2011 , https://pdfs.semanticscholar.org/a25c/1909e00b108832cd701c60b9cedb7544f36a.pdf,  P. 1-54.

 

[21]  Deyanati, Z., Moradzade, M., and Mahmodi, S., To study the effects of the institutional investors on the stock price crash risk, The Quarterly Journal of Investment Knowledge, 2012, 1(2), P.1-18, (in Persian).

 

[22]  Newman, D.P., Patterson, E.R., and Smith J.R., The role of auditing in investor protection, The Accounting Review, 2005, 80, P.289–313, Doi:10.2308/accr.2005.80.1.289.

 

[23]  Persakis, A, and Iatridisa, G., Audit quality, investor protection and earnings management during the financial crisis of 2008: An international perspective, Journal of International Financial Markets, Institutions & Money, 2016, 41, P. 73–101, Doi:10.1016/j.intfin.2015.12.006.

 

[24]  Klapper, L. and Love, I., Corporate governance, investor protection, and performance in emerging markets,  SSRN Electronic Journal , 2002, 10(5), p.703-728,  Doi: 10.1016/S0929-1199(03)00046-4.

 

[25]  Francis, J., LaFond, R.., Olsson, P., and Schipper, K., The Market Pricing of Accruals Quality, Journal of Accounting and Economics, 2005, 39 (2), P.295-327, Doi:10.1016/j.jacceco.2004.06.003.

 

[26]  Dechow, P. M., Sloan, R.G. and Sweeney, A.P. Detecting earnings management, The Accounting Review, 1995, 70 (2), P.193-225.

 

[27] Hajiha, Z., Oradi, J. and  Saleh abadi, M., Internal control weaknesses and Audit report lag, quarterly financial accounting journal. 2017, 9 (33), P.78-96.

 

 [28]  Chen, H., Wang, D. and Zhou, N., A Comprehensive and Quantitative Internal Control Index: Construction , Validation , and Impact, Review of Quantitative Finance and Accounting, 2016, 49(2), P.337-377, Doi: 10.1007/s11156-016-0593-x.

 

[29] Maetoofi, M. and Poor dadashi, A., Investigating the Relationship between Controlled Shareholders and Tax Avoidance with Regarding the Moderating Role of Family Ownership and Audit Committee in Companies Listed in Tehran Stock Exchange, Audit Knowledge, 2019, 19(74),  P.127-149, http://danesh.dmk.ir/article-2162-1-fa.html.

 

[30] Safarzadeh, M.H., The Effect of Shareholder Rights on Earnings Quality, Journal of Experimental Accounting Research ,2013,  3(1), P.147-172.

 

[31] Hamidian, M. and Taghizadeh, N.,  Audit quality, investor protect, and earnings management during the financial crisis, Audit knowledge, 2018, 18(71), P.129-148, http://danesh.dmk.ir/article-1877-1-fa.html.

 

       [32] Valizade larijani, A., Mojtahedzadeh, V. and Hejazi, R., Corporate Governance Mechanisms and Capial

      Market Response to Audit Quality, Journal of Securities Exchange, 2015, 8(31), P.141-161.

 

        [33]  Chen, J., Hong, H., and Stein, J.C., Forecasting crashes: trading volume, past returns, and conditoinal                                                    Skewness in stock prices, Journal of Finance Economic,2001, 61, P. 345–381, Doi: 10.3386/w7687.

 

        [34]  Bradshaw, M. T., Hutton, A. P., Marcus, A.  J. and H. Tehranian, Opacity, Crashes, and the Option    Smirk Curve, 2010, P.1-41, Doi:10.2139/ssrn.1640733 .

 

        [35]  Andreou, P. C., Antoniou, C., Horton, J. and Louca, C.,  Corporate Governance and Stock Price                                                   Crashes, 2012, Available At URL: Http://www.srn.Com.

 

        [36]  Hung, H., and Stein, J.C. , Differences of Opinion, Short-Sales Constraints, and Market Crashes, The    Review of Financial Studies, 2003, 16(2), P.487-525, Doi: 10.1093/rfs/hhg006.