Earnings quality and crash risk in China: an integrated analysis

Abstract

PurposeThe authors provide a comprehensive empirical examination on the impact of earnings quality on stock price crash risk in China.Design/methodology/approachThe authors acknowledge and distinguish two-dimensional proxies for earnings quality – accounting-based (earnings management degree) and market-based (earnings transparency) known in accounting and finance literature.FindingsThe authors find that both generally indicate that better earnings quality is associated with less crashes. However, extremely high earnings transparency interacted with insider trading profit can also actually exacerbate stock price crashes.Originality/valueThis study is the first to highlight the pertinence of accounting-based measures to proxy for earnings quality in a fast-growing emerging market environment such as China.

The impact of COVID-19 on the stock market crash risk in China

“…Although there is mounting literature examining how investors have overreacted (or underreacted) to the COVID-19 pandemic (e.g., Aslam et al, 2020 ; Schell et al, 2020 ; Yarovaya et al, 2020 ), what drives the stock market crash risk in China has yet to be addressed. It is marginally relevant to consider that the combination of economic uncertainty and behavioral factors positively contribute to financial asset crash risk (e.g., Bitcoin ( Kalyvas et al, 2020 ) and the Chinese stock market ( Jin et al, 2019 ; Luo and Zhang, 2020 ; Ju, 2019 ; Wongchoti et al, 2020 )). Notably, how the aforementioned factors drive the stock market during disaster periods remains unclear.…”

الدور الوسیط لجودة التقاریر المالیة فی العلاقة بین التخصص الصناعی لمراقب الحسابات وخطر إنهیار أسعار أسهم الشرکات المقیدة بالبورصة المصریة – دراسة تطبیقیة

“…‫اُغبثوخ‬ ‫اُذساعبد‬ ٖٓ ‫اُؼذ٣ذ‬ ‫ٗزبئظ‬ (Wongchoti et al, 2020 ;Haghighi and Gerayli, 2019) . (Chae et al, 2020 ;Mahmoodabadi et al, 2020) ‫خطش‬ ‫ؽذٝس‬ ‫ٓغججبد‬ ‫ػٞء‬ ‫ٝك٢‬ ‫اٜٗ٤بس‬ ‫أعؼبس‬ ‫األعْٜ‬ ‫اُ٘زبئظ‬ ٖٓ ‫اُؼذ٣ذ‬ ‫دػٔزٜب‬ ‫ٝاُز٢‬ ‫اُزغش٣جخ‬ (Valiana et al,2021;Butar and Murniati, 2021;Wongchoti, et al, 2020;Kim, etal., 2019;Hsu and…”

“…In all, it indicates that the companies that are audited by an industrially specialized auditor have reduced earnings management practices through receivables and the financial reporting quality increases, and thus the stock price crash risk decreases in the future. (Valiana et al,2021;Butar and Murniati, 2021;Wongchoti, et al, 2020;Kim, etal., 2019;Hsu and (Wongchoti, et al, 2020 ;Chen, et al, 2017) ‫اإلداس٣خ‬ ‫ٝاُوذسح‬ , (Cui et al,2019 ;Habib and Hasan, 2017) ‫ٝاُضوخ‬ , ‫أُلشؽخ‬ ‫اإلداس٣خ‬ (Liang et al,2019 ;Kim etal., 2016) ‫ٓٞاعٜخ‬ ‫ٝاؽزٔبٍ‬ , ‫ٓغزوجال‬ ‫ٓبُ٢‬ ‫ُزؼضش‬ ‫اُششًخ‬ (Xue and Ying, 2020) ‫أُِٔٞعخ‬ ‫ؿ٤ش‬ ‫األطٍٞ‬ ‫ًٝضبكخ‬ , ‫اُلٌش١‬ ‫أُبٍ‬ ‫سأط‬ ‫أٝ‬ (Probohudono etal., 2021;Wu and Lai, 2020 (Butar and Murniati, 2021;Wongchoti, et al, 2020;Kim, etal ‫أُؾبعج٢‬ ‫اُلٌش‬ ‫ك٢‬ ‫اُغبثوخ‬ ‫اُذساعبد‬ (Mahmoodabadi et al,2020;Li etal., 2019 ;Habib and Hasan, 2016 ;Sun and Liu, 2013 (Lee, 2020 ;Hegazy etal., 2015 ;Sun and Liu, 2013;Balsam et al,2003 (Butar and Murniati, 2021;Wongchoti, et al, 2020;Kim, etal., 2019) ٝ ٖٓ ‫اُشؿْ‬ ‫ػِ٢‬ ‫عٞدح‬ ‫ٓلٜٞٓ٢‬ ‫إٔ‬ ‫أُشاعؼخ‬ ‫ٝعٞدح‬ ‫أُبُ٤خ‬ ‫اُزوبس٣ش‬ ‫ه٤بعٜ‬ ‫ً٤ل٤خ‬ ‫ػِ٢‬ ‫ٓزلن‬ ‫ٝؿ٤ش‬ ‫األثؼبد‬ ‫ٓزؼذدح‬ ‫ٝٓخزِطخ‬ ‫عذُ٤خ‬ ‫ٓلبٛ٤ْ‬ ٢ٛ ٔ ‫ك٢‬ ‫ٝاػؼ‬ ‫ثشٌَ‬ ‫ب‬ ‫أُؾبعج٢‬ ‫اُلٌش‬ (Mahmoodabadi et al,2020 ;Salehi, et al, 2018…”

“…‫األًبد٣ٔ٤خ‬ ‫اُجؾٞس‬ ٖٓ ‫اُٜبئَ‬ ‫اٌُْ‬ ‫٣لغش‬ (Butar and Murniati, 2021;Wongchoti et al, 2020;Kim etal., 2019 (Valiana et al, 2021 ;Wu et al,2020 ;Habiba et al, 2018 ;Andreou et al, 2016) (Mahmoodabadi et al, 2020 ;Wongchoti, et al, 2020 ;Chae, et al, 2020;Zhu, 2016;Robin and…”

Determinants of the possibilities by investors’ risk-taking: Empirical evidence from Vietnam

“…One of the researchers has contributed to the development of financial behavior when combining the psychology and finance is Gabriel Tarde, then there has been further research on the application of psychology to finance and there is a significant development of appearing this study in more schools of study to exploit different aspects of the psychology of human behavior. One of the most important decisions of investors is to decide to take the risk under consideration of implicit risk owned by each kind of asset (Wongchoti et al, 2020). And knowing that investment projects having a high probability of risk often brings more profit than the safer ones.…”