Accounting Conservatism and Stock Price Crash Risk: Firm‐level Evidence
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A frame that forgets how it found something cannot be audited. These are the routes that admitted this work.
No Canadian affiliation. An affiliation-only frame — the usual design — would never have seen this work. It is one of the works that make the case for inverting the frame.
Abstract
Abstract Using a large sample of U.S. firms during 1964–2007, we find that conditional conservatism is associated with a lower likelihood of a firm's future stock price crashes. This finding holds for multiple measures of conditional conservatism and crash risk and is robust to controlling for other known determinants of crash risk and firm‐fixed effects. Moreover, we find that the relation between conservatism and crash risk is more pronounced for firms with higher information asymmetry. Overall, our results are consistent with the notion that conditional conservatism limits managers’ incentive and ability to overstate performance and hide bad news from investors, which, in turn, reduces stock price crash risk.
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The record
- Venue
- Contemporary Accounting Research
- Topic
- Auditing, Earnings Management, Governance
- Field
- Business, Management and Accounting
- Canadian institutions
- —
- Funders
- Social Sciences and Humanities Research Council of CanadaCity University of Hong Kong
- Keywords
- ConservatismIncentiveCrashStock priceStock (firearms)Information asymmetryEconometricsSample (material)EconomicsFinancial economicsActuarial scienceBusinessFinanceMicroeconomicsEngineeringPolitical scienceComputer science
- Has abstract in OpenAlex
- yes