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Full-Text Articles in Business
Readability Of 10-K Reports And Stock Price Crash Risk, Chansog (Francis) Kim, Ke Wang, Liandong Zhang
Readability Of 10-K Reports And Stock Price Crash Risk, Chansog (Francis) Kim, Ke Wang, Liandong Zhang
Research Collection School Of Accountancy
This study shows that less readable 10‐K reports are associated with higher stock price crash risk. The results are consistent with the argument that managers can successfully hide adverse information by writing complex financial reports, which leads to stock price crashes when the hidden bad news accumulates and reaches a tipping point. Cross‐sectional analyses show that the effect of financial reporting complexity on crash risk is more pronounced for firms with persistent negative earnings news or transitory positive earnings news, greater chief executive officer stock option incentives, or lower litigation risk. Finally, accrual manipulation appears to be positively related to …
Ceo Overconfidence And Stock Price Crash Risk, Jeong-Bon Kim, Zhang Wen, Liandong Zhang
Ceo Overconfidence And Stock Price Crash Risk, Jeong-Bon Kim, Zhang Wen, Liandong Zhang
Research Collection School Of Accountancy
This study examines the association between chief executive officer (CEO) overconfidence and future stock price crash risk. Overconfident managers overestimate the returns to their investment projects and misperceive negative net present value (NPV) projects as value creating. They also tend to ignore or explain away privately observed negative feedback. As a result, negative NPV projects are kept for too long and their bad performance accumulates, which can lead to stock price crashes. Using a large sample of firms for the period 1993–2010, we find that firms with overconfident CEOs have higher stock price crash risk than firms with nonoverconfident CEOs. …
Accounting Conservatism And Stock Price Crash Risk: Firm-Level Evidence, Jeong-Bon Kim, Liandong Zhang
Accounting Conservatism And Stock Price Crash Risk: Firm-Level Evidence, Jeong-Bon Kim, Liandong Zhang
Research Collection School Of Accountancy
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, …
Cfos Versus Ceos: Equity Incentives And Crashes, Jeong-Bon Kim, Yinghua Li, Liandong Zhang
Cfos Versus Ceos: Equity Incentives And Crashes, Jeong-Bon Kim, Yinghua Li, Liandong Zhang
Research Collection School Of Accountancy
Using a large sample of U.S. firms for the period 1993-2009, we provide evidence that the sensitivity of a chief financial officer's (CFO) option portfolio value to stock price is significantly and positively related to the firm's future stock price crash risk. In contrast, we find only weak evidence of the positive impact of chief executive officer option sensitivity on crash risk. Finally, we find that the link between CFO option sensitivity and crash risk is more pronounced for firms in non-competitive industries and those with a high level of financial leverage.
Corporate Tax Avoidance And Stock Price Crash Risk: Firm-Level Analysis, Jeong-Bon Kim, Yinghua Li, Liandong Zhang
Corporate Tax Avoidance And Stock Price Crash Risk: Firm-Level Analysis, Jeong-Bon Kim, Yinghua Li, Liandong Zhang
Research Collection School Of Accountancy
Using a large sample of U.S. firms for the period 1995-2008, we provide strong and robust evidence that corporate tax avoidance is positively associated with firm-specific stock price crash risk. This finding is consistent with the following view: Tax avoidance facilitates managerial rent extraction and bad news hoarding activities for extended periods by providing tools, masks, and justifications for these opportunistic behaviors. The hoarding and accumulation of bad news for extended periods lead to stock price crashes when the accumulated hidden bad news crosses a tipping point, and thus comes out all at once. Moreover, we show that the positive …