Opaque financial reports, R2, and crash risk☆

Hutton, Amy P.; Marcus, Alan J.; Tehranian, Hassan

doi:10.1016/j.jfineco.2008.10.003

Cited by 1,896 publications

(1,827 citation statements)

References 37 publications

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“…They argue the "bad news" is released in a flash when the accumulation of "bad news" comes to its limit, resulting in a huge impact on capital market and the collapse of share price. The existing literature basically covers the information quality (Hutton et al, 2009;Kim et al, 2011aKim et al, , 2016, various stakeholders such as management (Xu et al, 2014;Kim et al, 2011b;Li & Liu, 2012), shareholder (Wang et al, 2015), analysts (Xu, 2012) and external factors such as institutional environment (Pan et al, 2011;Lin & Zheng, 2016), media governance (Luo & Du, 2014), etc. One of the basic ideas in academia for preventing and mitigating the stock price crash is to improve the company's information transparency and reduce the self-interest of management.…”

Section: Literature Reviewmentioning

confidence: 99%

Can Corporate Innovation Restrain the Stock Price Crash Risk?

Zhou¹,

Pan²

2018

JFRM

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Preventing the crash of stock prices and guaranteeing the steady of the capital market have become a significant issue when the strong supervision of financial risk becomes a consensus. Taking the A-share listed companies as research sample, this paper takes the enterprise innovation behavior into analysis framework of the stock price crash risk, and the study found that corporate innovation can curb the crash risk of stock price effectively, especially in the firm facing with strong financing constraints and the information transparency is equivocal. The research in this paper provides a new idea for the market value management of listed companies, and it also helps to control financial risks, maintain capital market stability; more importantly, it enriches the existing literature.

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Section: Literature Reviewmentioning

confidence: 99%

Can Corporate Innovation Restrain the Stock Price Crash Risk?

Zhou¹,

Pan²

2018

JFRM

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“…Em termos gerais, observa-se que as variáveis utilizadas apresentaram aumento na maioria dos casos. Esse aumento tem interpretações diversas, pois o aumento do nível de endividamento, por exemplo, pode-se entender como um indicativo ruim a priori (Hutton, Marcus, & Teharanian, 2009), porém, positivamente, pode evidenciar um aumento das oportunidades de investimentos (Myers & Majluf, 1984 Além disso, verifica-se que houve uma melhoria em alguns indicadores relevantes para a análise financeira, tais como: LnAtivos, CrescAtivo, ROA. Observou-se também redução em indicadores importantes para a mesma finalidade, destacando-se: LnRi, AccrualsTotais e CVEbit.…”

Section: Estatística Descritivaunclassified

Determinantes das Republicações no Mercado Brasileiro: Uma Análise a partir dos Incentivos ao Gerenciamento de Resultados

Marques

Amaral

Souza

et al. 2017

REPeC

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“…Following Hutton et al [8] to calculate stock price crash risk, first the model should be tested for each year-company and then the residual or the firm-specific monthly stock return (W i,θ ) should be calculated using the following formula. We include "crash months" as those in which a firm experiences firm-specific monthly returns 3.2 standard deviations below the mean firm-specific monthly returns over the entire fiscal year.…”

Section: Inventory: Total Inventories Over Total Assetsmentioning

confidence: 99%

“…According to Hutton et al [8] and Kim and Zhang [7] stock price crash implies that a corporate's stock price has suffered a sharp decline in the year under review. As the severe reductions in stock price can be the result of a general decline in market prices, the overall situation in the market should also be noted and the sharp reduction in stock return compared to the returns of the market should be defined.…”

Section: Introductionmentioning

confidence: 99%

The Effect of Internal Control Material Weaknesses on Future Stock Price Crash Risk: Evidence from Tehran Stock Exchange (TSE)

Araghi¹,

Lashgari²

2017

Int J Account Res

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IntroductionAccording to the internal control guidelines adopted by Tehran Stock Exchange (TSE) in 2012, in order to achieve corporate objectives, the board of directors is required to ensure that internal controls are established and implemented appropriately and effectively, and at least annually, disclose the results in a report entitled "Reports on internal controls". That is why the topic was the focus of professional associations and experts in the field of accounting. According to the above mentioned definitions, empirical research on the issue is more essential than ever. Weaknesses in internal control can either directly or indirectly affect an entity's activities. Therefore, this study examines whether internal control weaknesses can affect stock price crash risk.Internal control is a dynamic system covering all kinds of risks and deviations from policies and procedures Chorafas [1]. Chenhall [2] believes that internal controls are adopted to assist management to achieve business goals and desired results. Ogneva et al. [3] believe that internal control is a fundamental and dynamic process that continuously conforms to the changes that their organizations are faced with Karagiorgos et al. [4] believe that internal control is not just a one-sided tool for controlling the order and rightness of certain situations, but it is a method of detecting the value added up to a company, achieving the index of effectiveness and profitability of the company. Internal control systems reduce risks and help management in ensuring the reliability of financial statements and compliance with laws and regulations Spira and Page [5]. A weak control environment has the potential to allow error in estimation and procedures, earning's management by opportunistic managers and their tendency to withhold bad news due to various incentives Kothari et al. [6].Corporate managers tend to exaggerate their financial performance by withholding bad news and accelerating the release of good news, hoping that poor current performance will be camouflaged by strong future performance. If managers withhold and camouflage bad news for an extended period, negative information is likely to be stockpiled within a company. Once the amount of accumulated bad news reaches a certain threshold and concealing them for a longer period is more costly or impossible, it will be released all at once, leading to negative stock returns following to shareholders' concern and thus stock price crashes Kim and Zhang [7]. The main question is whether the lack of effective internal control or a material weakness in internal control over financial reporting affects the major sources of information that is financial statements provided by corporations for capital market participants so that it leads to future stock price crash risk.According to Hutton et al. [8] and Kim and Zhang [7] stock price crash implies that a corporate's stock price has suffered a sharp decline in the year under review. As the severe reductions in stock price can be the result of a general d...

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Opaque financial reports, R2, and crash risk☆

Cited by 1,896 publications

References 37 publications

Can Corporate Innovation Restrain the Stock Price Crash Risk?

Can Corporate Innovation Restrain the Stock Price Crash Risk?

Determinantes das Republicações no Mercado Brasileiro: Uma Análise a partir dos Incentivos ao Gerenciamento de Resultados

The Effect of Internal Control Material Weaknesses on Future Stock Price Crash Risk: Evidence from Tehran Stock Exchange (TSE)

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