Financial quality, internal control and stock price crash risk

We investigate the effects of financial quality and internal control on stock price crash risk by using the listed companies in A-share market from 2007 to 2017. The result shows that financial quality reduces the risk of stock price crisis. Moreover, the relationship can be enhanced by improving th...

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Bibliographic Details
Published in:Asia-Pacific journal of accounting & economics 2022-11, Vol.29 (6), p.1671-1691
Main Authors: Xue, Changyong, Ying, Yeung
Format: Article
Language:English
Subjects:
business life cycle
financial quality
information asymmetry
internal control
Stock price crash risk
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Summary:We investigate the effects of financial quality and internal control on stock price crash risk by using the listed companies in A-share market from 2007 to 2017. The result shows that financial quality reduces the risk of stock price crisis. Moreover, the relationship can be enhanced by improving the internal control. Further, considering the heterogeneity, financial quality has a stronger influence on new companies, while internal control has a stronger influence on mature companies. For companies with larger agency conflict between the management and shareholders, internal control can effectively reduce stock price crash risk.
ISSN:1608-1625
2164-2257
DOI:10.1080/16081625.2020.1754254