Audit Opinion, Stock Price Crash Risk, Corporate Governance Quality

Document Type : Research Paper

Authors

Department of Accounting, Faculty of Social Science, Imam Khomeini International University, Qazvin, Iran.

Abstract

Objective: Stock price crash risk is an unfavorable event characterized by a severe negative stock return. The primary challenge of this research is to explore the factors associated with stock price crash risk. The objective of the present study is to explain the relationship between auditors' opinions and stock price crash risk, with an emphasis on the quality of corporate governance, based on signaling theory, contingency theory, and public interest theory.
 
Method: To achieve this objective, data from 125 companies (1,250 firm-year observations) listed on the Tehran Stock Exchange from 2013 to 2022 were analyzed using panel data and multivariate regression analysis.
 
Findings: The results indicate a negative and significant relationship between the quality of corporate governance and stock price crash risk. Additionally, a positive and significant relationship was observed between the type of auditors' opinions and stock price crash risk. Based on these findings, it can be concluded that, in companies with a high level of conflict of interest, the presence of effective corporate governance mechanisms is essential for preventing stock price crashes.
 
Conclusion: The findings emphasize that, in companies characterized by high levels of conflict of interest, strong corporate governance and independent, transparent auditing can serve as effective tools for reducing stock price crash risk. This implies that shareholders and potential investors should consider the impact of sound corporate governance on stock prices.

Keywords

Main Subjects

References

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History

  • Receive Date: 25 September 2024
  • Revise Date: 07 January 2025
  • Accept Date: 23 April 2025

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