The Investigation of Mechanisms to Prevent Stock Price Crash Risk

The purpose of this study is achieving empirical evidence related in the factors for preventing the stock price crash risk. Accordingly, we investigate financial reporting policies and capabilities of the independent auditors, two key areas affecting economic outcomes. To measure the company's financial reporting policies, we applied financial reporting transparency and accounting conservatism and to measure auditor capabilities, we used auditor tenure and auditor industry specialization.

in this article, we use semi-empirical method based on information released by listed companies in Tehran Stock Exchange, in the period 1388 to 1394 and we use 113 firms for final analyses. In order to test the hypotheses, we use generalized linear regression and logistic regression.

The results show that the client auditor industry specialization has significant negative relationship with all three risk factors. Also, any significant relationship was observed auditor tenure and the first two first stock price crash risk and positive relationship between auditor tenure and the third factors stock price crash risk was shown. There are significant negative relationship between the degree of accounting conservatism and the first two factors of risk. Also, there are significant negative relationship between financial reporting transparency and second and third factors. Contribution: This study give some of the mechanisms to shareholders and managers to reduce the stock pricescrash risk and is introduced three instruments including the auditor industry specialization, financial reporting transparency and accounting conservatism to control stock price crash risk.