Audit Opinion, Stock Price Crash Risk, Corporate Governance Quality

Articles in Press

Document Type : Research Paper

Authors

1 accounting, faculty of social science, Imam Khomeini International University, Qazvin, Iran

2 Ph.D. Candidate of Accounting, Imam Khomeini International University, Qazvin, Iran

10.22103/jak.2025.24085.4098

Abstract

Objective: The risk of stock price crash 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, data from 125 companies (1250 firm-year observations) listed on the Tehran Stock Exchange from 2013 to 2022 were analyzed using panel data and multivariate regression.



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 appropriate corporate governance mechanisms is essential to prevent stock price crashes.



Conclusion: The findings emphasize that in companies with high conflict of interest, strong corporate governance and independent, transparent auditing can serve as effective tools to reduce stock price crash risk. This implies that shareholders and potential investors should consider the impact of good corporate governance on stock prices.

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Main Subjects

Journal of Accounting Knowledge

Articles in Press, Accepted Manuscript
Available Online from 23 April 2025

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History

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

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