Publication Type

Journal Article

Version

submittedVersion

Publication Date

3-2016

Abstract

Using a large sample of U.S. firms during 1964-2007, we find that conditional conservatism is associated with a lower likelihood of a firm's future stock price crashes. This finding holds for multiple measures of conditional conservatism and crash risk and is robust to controlling for other known determinants of crash risk and firm-fixed effects. Moreover, we find that the relation between conservatism and crash risk is more pronounced for firms with higher information asymmetry. Overall, our results are consistent with the notion that conditional conservatism limits managers' incentive and ability to overstate performance and hide bad news from investors, which, in turn, reduces stock price crash risk.

Keywords

accounting conservatism, crash risk, bad news hoarding, asymmetric timeliness

Discipline

Accounting | Corporate Finance

Research Areas

Corporate Reporting and Disclosure

Publication

Contemporary Accounting Research

Volume

33

Issue

1

First Page

412

Last Page

441

ISSN

0823-9150

Identifier

10.1111/1911-3846.12112

Publisher

Canadian Academic Accounting Association

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1111/1911-3846.12112

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