Provide a Model of Manager's Organizational Inertia and Examine its Effect on Stock Price Crash Risk

An important part of managers' decision-making functions is rooted in organizational functions in terms of the existence of drivers to monitor their performance. Inertia is considered as one of the consequences of poor organizational performance in regulatory effectiveness as a factor to institutionalize power in managers and create opportunism to prioritize their interests. The Purpose of this research is Provide a model of manager's organizational inertia and examine its effect on Stock Price Crash Risk. In this study, stock price crash risk is calculated using three proxies and data related to organizational inertia of managers were collected through meta-analysis, Delphi analysis and finally sending a questionnaire to sample companies. The questionnaire is sent to 163 firms, among which 126 ones answered back. In order to perform the analysis process, the partial least squares analysis method was used. The results showed that managers' organizational inertia has a positive and significant effect on stock price crash risk. This result shows that non-disclosure of bad news for a long period of time is always created in the structural system of companies and even regulatory bodies, which is often due to organizational inertia, a lack of mobility in effective monitoring of managers' performance. By affecting the difference between intrinsic value and stock market value, it creates a price gap or bubble. This bubble is actually a mass of negative news that, based on the principle of utility in the economy, is transmitted to the market at a saturation point and causes the bursting of the price bubble will result in stock price crash risk.