The relationship between financial statements comparability and stock price crash risk with an emphasis on the role of information asymmetry

Document Type : Original Article

Authors

1 Department of Accounting, Faculty of Management, Economy and Accounting,Tabriz branch, Islamic Azad University, Tabriz, iran

2 Instructor, Department of accounting, Tabriz branch- Gowgan Center, Islamic Azad University, Tabriz, Iran

Abstract

Improvement in qualitative characteristic of comparability in the financial statements enables users to identify similarities and differences in the economic events across firms over the time and optimally allocate their resources. The main aim of this study is determining the relationship between financial statements comparability and stock price crash risk with an emphasis on the role of information asymmetry in companies listed on Tehran Stock Exchange (TSE) using a statistical sample of 132 firms (1320 observation) from 2006 to 2015. In this study, financial statements comparability was evaluated following De Franco et al (2011) empirical methodology, and the stock price crash risk was measured through the Hutton et al (2009) Model. In order to test the research hypotheses of this study, logistic regression has been used. The results of this study show that the stock price crash risk significantly decreases by enhancing financial statements comparability, and also this negative relation is more intense for firms with high information asymmetry condition.

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History

  • Receive Date: 09 January 2019
  • Revise Date: 29 August 2019
  • Accept Date: 03 September 2019

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