Proposing a mathematical model to measure corporate governance and its consequences on the companies’ stock crash risk

Subject Areas : Financial Knowledge of Securities Analysis

maryam sadeghi ¹ (Ph.D. Student, Department of Accounting , Kashan Branch, Islamic Azad University, Kashan,Iran)
Hossein Panahian ² (Associate Professor، department of accounting and management ، Azad University of Kashan ،kashan،Iran)
mehdi safari geryli ³ (department of accounting)
Meysam Arabzadeh ⁴ (Department of Accounting, Kashan Branch, Islamic Azad University, Kashan, Iran)
rahman saedi ⁵ (Department of Accounting, Isfahan(khorasgan) Branch, Islamic Azad University, Isfahan, Iran,)

Received: 2022-05-07 Accepted : 2022-05-07 Published : 2022-02-20

Keywords: Corporate Governance, Composite measures of corporat, Since stock crash,

Abstract :

The present study examines the impact of corporate governance on the stock crash risk of companies. Although in previous studies several indicators have been used to measure corporate governance, the present study using multi-criteria decision model to combine numerous individual metrics (one-dimensional) available in accounting and financial literature with the help of experts' opinions and their weighting, and by using mathematical modeling provides a Composite measures of corporate governance and then tests its impact on companies' stock crash. The research hypothesis was tested using a sample consisting of 125 companies listed on the Tehran Stock Exchange during the years 2015 to 2019 and using a multivariate regression model based on combined data technique. The results show that there is a negative and significant relationship between corporate governance and the stock crash risk. Also, the results of the sensitivity analysis test indicate that the use of alternative criteria to measure the stock crash risk does not affect the main results of the study and the research results are strong enough. The research findings, while filling the gap of previous studies on providing a Composite mathematical model for measuring corporate governance, can be a guide for capital market legislators, investors and other users of accounting information in making decision.

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