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
Citation
KIM, Jeong-Bon and ZHANG, Liandong.
Accounting conservatism and stock price crash risk: Firm-level evidence. (2016). Contemporary Accounting Research. 33, (1), 412-441.
Available at: https://ink.library.smu.edu.sg/soa_research/1708
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1111/1911-3846.12112