Impact of Corporate Governance Measures on Stock Price Crashes of Listed Companies in Tehran Stock Exchange

Document Type : Original Article

Authors

1 Assistant Professor of Accounting, Shahid Chamran, University of Ahvaz, Iran

2 Student of Master Accounting, Shahid Chamran, University of Ahvaz, Iran

Abstract

The aim of this study is to investigate the effect of corporate governance measures on stock price crashes of listed companies in Tehran Stock Exchange. The four mechanisms of corporate governance in our study are: ownership structure, accounting transparency, board structure and processes, and CEO duality. In this paper this purpose nine hypotheses are developed and data on the 99 companies listed in Tehran Stock Exchange for the period of 2005 to 2014 are analyzed. A regression model using panel data with fixed effects approach, incorporated to test hypotheses. The findings indicate that the concentration of ownership measure of corporate governance has significant positive impact and institutional ownership, management ownership, board independence and duality of CEO has a significant negative impact stock price crashes. Also, the results show that the CEO duality and accounting transparency has no significant influence on stock price crashes. In additional analysis we find that these effects are asymmetric, and they are stronger in less competitive with higher uncertainty industries (where governance as a monitoring mechanism is more important).
 
 

Keywords

Main Subjects

References

احمدپور، احمد، زارع بهنمیری، محمد‌جواد و کرامت‌الله حیدری رستمی. (1393). بررسی تأثیر ویژگی‌های شرکت بر ریسک سقوط قیمت سهام (شرکت‌های پذیرفته‌شده در بورس اوراق بهادار تهران). فصلنامۀ بورس و اوراق بهادار، شمارۀ 28، صص 45-29.
2- اسماعیل‌زاده، علی، جلیلی، محمد و عباس زند عباس‌آبادی. (1389). تأثیر حاکمیت شرکتی بر کیفیت سود در شرکت‌های پذیرفته‌شده در بورس اوراق بهادار تهران. حسابداری مدیریت، شمارۀ 7، صص 91-79.
3- افلاطونی، عباس. (1392). تجزیه و تحلیل آماری با Eviews در تحقیقات حسابداری مالی، مدیریت مالی و علوم اقتصادی. چاپ اول. تهرا‌ن: انتشارات ترمه.
4- دیانتی دیلمی، زهرا، لطفی، محسن و کسری آزاد‌بخش. (1391). تأثیر مدیریت‌ سرمایه در گردش مبتنی بر چرخۀ تبدیل نقدی «گیتمان» بر کاهش ریسک سقوط (ریزش) قیمت سهام. دانش حسابداری و حسابرسی مدیریت، شمارۀ 4، صص 64-55.
5- سینایی، حسینعلی و عبدالله داودی. (1388). بررسی رابطۀ شفاف‌سازی اطلاعات مالی و رفتار سرمایه‌گذاران در بورس اوراق بهادار تهران. تحقیقات مالی، شمارۀ 27، صص 60-43.
6- فروغی، داریوش و منوچهر میرزایی. (1391). تأثیر محافظه‌کاری شرطی حسابداری بر ریسک سقوط قیمت سهام در بورس اوراق بهادار تهران. مجلۀ پیشرفت‌های حسابداری شیراز، شمارۀ 63، صص 117-77.
7- فروغی، داریوش، میرزایی، منوچهر و امیر رسائیان. (1391). تأثیر فرار مالیاتی بر ریسک سقوط قیمت سهام در شرکت‌های پذیرفته‌شده در بورس اوراق بهادار تهران. پژوهشنامۀ مالیات، شمارۀ 13، صص 102-70.
8- مهرانی، کاوه، بیگ بشرویه، سلمان و زهرا شهیدی. (1393). رابطۀ سازو‌کارهای راهبری شرکتی با کیفیت گزارشگری مالی. پژوهش حسابداری، شمارۀ 12، صص 19-1.
9- Ajinkya, B., Bhojraj, S., and P. Sengupta. (2005). The Association between Outsider Directors and Institutional Investors and the Properties of Management Earning Forecast. Journal of Accounting Research, Vol. 43, Pp. 343-376.
10- Armstrong, C., Balakrishnan, K., and D. Cohen. )2012(. Corporate Governance and the Information Environment: Evidence from State Antitakeover Laws. Journal of Accounting and Economics, Vol. 53, Pp.185-204.
11- Baker, M., Ruback, R.S., and J. Wurgler. )2004. (Behavioral Corporate Finance: A Survey. Unpublished working paper. Harvard Business School and NBER, Harvard Business School NYU Stern School, of Business and NBER.
12- Baker, M., and J. Wurgler. )2006(. Investor Sentiment and the Cross-Section of Stock Returns.The Journal of Finance, Vol. 61, Pp. 1645-1680.
13- Ball, R. )2001(. Infrastructure Requirements for an Economically Efficient System of PublicFinancial Reporting and Disclosure. Brookings-Wharton Papers on Financial Services, Pp. 127-169.
14- Bebchuk, L.A, and L. Stole. )1993(. Do Short-term Managerial Objectives Lead to under- or Overinvestment in Long-term Projects? Journal of Finance, Vol.48, Pp. 719-729.
15- Benmelech, E., Kandel, E., and P. Veronesi. )2010(. Stock-based Compensation and CEO (dis) Incentives. Quarterly Journal of Economics, Vol. 125, 1769–1820.
16- Bergstresser, D., and T. Philippon. )2006(. CEO Incentives and Earnings Management. Journal of Financial Economics, Vol.80, Pp. 511–529.
17- Bleck A., Liu, X., 2007. Market Transparency and the Accounting Regime. Journal ofAccounting Research, Vol. 45, Pp. 229–256.
18- Bushee, B. )1998(. The Influence of Institutional Investors on Myopic R&D Investment Behaviour. The Accounting Review, Vol.73, Pp. 305-333.
19- Chen, J., Hong, H., and J. Stein. )2001(. Forecasting Crashes: Trading Volume, Past Returns, and Conditional Skewness in Stock Prices. Journal of Financial Economics, Vol. 61, Pp. 345–381.
20- Cornett, M.M., Marcus, A.J., and H. Tehranian. )2008(. Corporate Governance and Pay-for Performance: The Impact of Earnings Management. Journal of Financial Economics, Vol. 87, Pp. 357-373.
21- Cueto, D.C. (2009). Market Liquidity and Ownership Structure with weak protection for minority shareholders: evidence from Brazil and Chile. Working paper. http://ssrn.com/
22- Dey, A. )2008(. Corporate Governance and Agency Conflicts. Journal of Accounting Research, Vol. 46, Pp.1143-1181.
23- Edmans, A. )2009(. Blockholder Trading, Market Efficiency, and Managerial Myopia. Journal of Finance, Vol. 64, Pp. 2481-2513.
24- Fama, E.F. and M.C. Jensen. (1983). Separation of Ownership and Control. Journal of Law and Economic, Vol. 26, Pp. 327-349.
25- Giroud, X., and H.M. Mueller. )2010(. Does Corporate Governance Matter in Competitive Industries? Journal of Financial Economics, Vol. 95, PP. 312–331.
26- Graves, S., and S. Waddock. (1990). Institutional Ownership and Control: Implications for Long-term Corporate Performance. Academy of Management Executive, Vol. 37, Pp. 1034-1046.
27- Gustavo, G., and M. Roni. (2012).The Impact of Product Market Competition onFirms PayoutPolicy", www.nhh.no /Files/ Filer /institutter/ for/ seminars/ finance /.../ 310812.pdf.
28- Healy, P. )1985(. The Effect of Bonus Schemes on Accounting Decisions. Journal of Accounting & Economics, Vol. 7, Pp. 85-107.
29- Healy, P., Hutton, A., and K. Palepu. )1999(. Stock Performance and Intermediation ChangesSurrounding Sustained Increases in Disclosure. Contemporary Accounting Research, Vol. 16, Pp. 485-520.
30- Hong, H. and J. C. Stein. (2003). Differences of Opinion, Short Sales Constraints, and Market Crashes. Review of financial studies, Vol. 16, No. 2, Pp. 16(2), 487-525.
31- Hsiu J. F. (2006). Effect of Financial Information Transparency on Investor Behavior in Taiwan Stock Market.
32- Hutton, A., Marcus, A., and H. Tehranian. )2009(. Opaque Financial Reports, R2, and Crash Risk.Journal of Financial Economics, Vol. 94, Pp. 67-86.
33- Jensen, M. C. (1986), Agency Costs of Free Cash Flow, Corporate Finance and Takeovers, American Economics Review, Vol. 76, pp. 323-339.
34- Jin, L. and S. C. Myers. (2006). R2Around the World: New Theory and New Tests. Journal of financial Economics, Vol. 79, No. 2, Pp. 257-292.
35- Jones, J. J. )1991(. Earnings Management During Import Relief Investigations. Journal of Accounting Research, Vol. 29, Pp. 193-228.
36- Karamanou, I., and N. Vafeas. )2005(. The Association between Corporate Boards, AuditCommittees, and Management Earnings Forecasts: An Empirical Analysis. Journal of Accounting Research, Vol. 43, Pp. 453-486.
37- Kim, J.B., Li, Y. and L. Zhang. (2010). Corporate Tax Avoidance and Stock Price Crash Risk: Firm-Level Analysis. Journal of Financial Economics, Val. 100, Pp. 639-662.
38- Kim, J.-B., Li, Y., and L. Zhang. )2011(. CFOs Versus CEOs: Equity Incentives and Crashes. Journal of Financial Economics, Vol. 101, Pp. 713-730.
39- Kim, J-B., and L. Zhang. (2010). Does Accounting Conservatism Reduce Stock Price Crash Risk? Firm-level Evidence. Unpublished working paper. City University of Hong Kong.
40- Klein, A. )2002(. Audit Committee, Board Characteristics and Earnings Management. Journal of Accounting and Economics, Vol. 33, Pp. 375-400.
41- Kothari, S.P., Shu, S., and P.D. Wysocki. (2009). Do Managers Withhold Bad News? Journal of Accounting Research, Vol. 47, Pp. 241-276.
42- Larcker, D., Richardson, S., and I. Tuna. )2007(. Corporate Governance, Accounting Outcomes, and Organizational Performance. The Accounting Review, Vol. 82, Pp. 963-1008.
43- Masulis, R., Wang, C., and F. Xie. )2007(. Corporate Governance and Acquirer Returns. Journal of Finance, Vol. 62, Pp. 1851–1889.
44- Minnick, M., and T. Noga. (2010). Do Corporate Governance Characteristics Influence Tax Management. Journal of Corporate Finance, Vol. 16, No.5, Pp. 703-718.
45- Mitra, S. (2002). The Impact of Institutional Stock Ownership on a Firm's Earnings Management Practice: An empirical investigation Unpublished Dissertation, Louisiana State University.
46- OECD. )2009(. Corporate Governance and the Financial Crisis: Key Findings and Main Messages. http://www.oecd.org/ corporate/ ca/ corporategovern anceprinciples/ 43056196. pdf.
47- Panayiotis C.A., Constantinos, A., Joanne, H., and L. Christodoulos. (2015). Corporate Governance and Firm-Specific Stock Price Crashes. http://ssrn.com/
48- Polk, C., and P. Sapienza. )2009(. The Stock Market and Corporate Investment: A Test of CateringTheory. Review of Financial Studies, Vol. 22, Pp. 187-217.
49- Porter, M.E. (1992). Capital Choice: Changing the Way America Invests in Industry. Journal of Applied Corporate Finance, Vol.5, Pp. 4–16.
50- Rubin, A. (2007). Ownership Level, Ownership Concentration and Liquidity. Journal of Financial Markets, Vol. 10, No 3, Pp. 219–248.
51- Shleifer, A., and R. Vishny. )1997(. A Survey on Corporate Finance. Journal of Finance, Vol. 52, Pp. 737-783.
52- Standard &Poor’S. (2002). Standard & Poor’s Corporate Governance Scores: Criteria, Methodology and Definitions. McGraw-Hill Companies, Inc., New York.
53- Warfield, T. Wild, J. and K. Wild. (1995). Managerial Ownership, Accounting choices and Informativeness of Earnings. Journal of Accounting and Economics, Vol. 20, No.1, Pp.61-91.
54- Xie, B., Davidson III, W.N, D., and P.J.Dalt. )2003(. Earnings Management and CorporateGovernance: The Roles of the Board and the Audit Committee. Journal of Corporate Finance, Vol. 9, Pp. 295-316.
55- Zhang, L. )2006(. Efficient Estimation of Stochastic Volatility Using Noisy Observations: a multi-scale approach. Bernoulli, Vol. 12, Pp. 1019-1043.

Files

History

  • Receive Date: 15 July 2015
  • Revise Date: 01 January 2017
  • Accept Date: 14 January 2017

Share

How to cite

Statistics