The Impact of Financial Limitation on the Risk of Falling Stock Prices by Emphasizing the Moderating Role of Tax Avoidance and Corporate Governance

The purpose of the present study is to investigate the effect of financial constraint on the risk of stock price collapse by emphasizing the moderating role of tax avoidance and corporate governance in listed companies in Tehran Stock Exchange. For this purpose, 140 companies were selected for the implementation of this research from 2012 to 2016. Combined data approach was used to test the research hypotheses. The results showed that financial constraint has a direct and significant effect on the risk of falling stock prices. That is, the constraint on financing is linked to stockpiling bad news and ultimately to falling stock prices. The sample companies were also divided into two groups of companies with strong and weak corporate governance, as well as those with and without tax avoidance. The hypothesis test results showed that the positive effect of financial restraint on the risk of falling stock prices is more severe in companies with poor corporate governance or tax avoidance. Finally, the findings show that the results are consistent with representation theory.