There is controversy regarding the impact of delayed good news and information asymmetry in financial reporting on firm-level crash risk. In the current exposure draft on the conceptual framework of financial reporting, information asymmetry is not considered a desired characteristic. We presented a framework for the demand for conservatism to mitigate information asymmetry and thus, decreasing the potential exposure to firm-level crash risk. Kim and Zhang (2010) claimed and provided evidence that conservatism is incrementally significant as a proxy of information asymmetry for predicting firm-level crash risk. If that claim is true, however, it will be sensible to argue that information asymmetry is non-trivial for firm-level crash risk assessment. Toward that end, this study directly tests if the timeliness of good news is trivial for firm-level crash risk assessment by specifying the firm-level crash risk in terms of a conservatism model. The study employed sample data from Egypt's capital market, which defines a setting dominated lately by firm-level crashes. We found evidence that timeliness of good news versus bad news explained by information asymmetry is significantly increasing the probabilities of experiencing firm-level crash risk; however, we found that conservatism reduces information asymmetry which eventually reduces the potential exposure to firm-level crash risk.

We surveyed the burgeoning literature on the determinants of firm-specific crash risk that relied heavily on the theoretical framework of Jin and Myers (2006) where, established on different drivers, managers engage in bad news hoarding activities. Stock price crash risk, the leptokurtic distribution of firm-specific returns, has been recently attracting considerable research interests. Following Habib, Hasan, and Jiang (2017), we synthesized and categorized a vast body of literature on the determinants of crash risk into: (i) financial reporting and corporate disclosures, (ii) managerial incentives and managerial characteristics, (iii) capital market transactions, (iv)corporate governance mechanisms, and (v) informal institutional mechanisms.