مطالعات تجربی حسابداری مالی (Sep 2021)
Investigating the relationship between earnings management patterns and stock crash risk with emphasis on the role of audit quality
Abstract
The risk of stock price crash is one of the topics of interest in capital market research. Since the main mission of capital market regulators is to protect the rights of investors, it has always been important to consider the factors that affect crash risk. The quality of financial reporting and earnings management patterns are the most important tools available to regulators that can help them manage crash risk aversion, which is why this study addressed them. Earning management patterns include earnings management through accruals and real earnings management. The statistical population of this study is the companies listed on the Tehran Stock Exchange and the research sample was selected in terms of some features (including 167 companies) for the period 2012 to 2018. The research method of the present study is descriptive- correlation and the research hypotheses are tested using the generalized least squares method. The results show that the accrued earnings management model is related to stock crash risk and the use of earnings management through accruals increases the risk of stock price falls. While this is not the case with earnings management through real activities, the application of this earnings management model has nothing to do with the negative changes in stock returns. In addition, audit quality weakens the relationship between accrued earnings management pattern and stock crash risk. While the relationship between real earnings management pattern and stock crash risk is not affected by audit quality
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