The Effect of Comparability of Financial Statements on Stock Price Crash Risk with Emphasis on the Role of Management Ability in Tehran Stock Exchange

Subject Areas : Journal of Capital Market Analysis

Abdolkarim Farhanian ¹ , Allah Karam Salehi ²

1 - Department of Accounting, Khoramshar-Persian Gulf International Branch, Islamic Azad University, Khoramshar, Iran.
2 - Department of Accounting, Masjed-Soleiman Branch, Islamic Azad University, Masjed-Soleiman, Iran

Received: 2021-08-26 Accepted : 2021-09-19 Published : 2021-08-23

Keywords: stock price Crash risk, Management Ability, Comparison of Financial Statements,

Abstract :

Improving the quality feature of comparability in financial statements enables users to better assess the similarities and differences related to economic activities between different companies over time and to be able to allocate their resources optimally. The main purpose of this study is to investigate the effect of comparability of financial statements on stock price crash risk with emphasis on the role of management ability in Tehran Stock Exchange, which was done using the information of 119 companies during the period 2014 to 2020. The results show that there is a positive and significant relationship between the management ability and the stock price crash risk and there is a nagative and significant relationship between the financial statements comparability and stock price crash risk. The results also indicate the adjustment effect of management ability on the relationship between comparability of financial statements and the stock price crash risk. Therefore, it can be concluded that managers, based on the agency theory and conflict of interest between managers and owners, may use their intelligence and talent to achieve personal return or due to overconfidence and hoarding of bad news, cause price bubbles and eventually stock price crash risk.