The effect of investors' behavioral biases on the future stock price crash risk with emphasis on the role of financial reporting quality

The philosophy of the neoclassical school of economics is based on the rational principle of the behavior of individuals as well as enterprises in economics. Behavioral financial perspective, on the other hand, shows that some changes in securities prices have no fundamental reason, and that investors' emotional behavior plays an important role in setting prices. The present study examines the effect of investors' behavioral biases on the future stock price crash risk with emphasis on the role of financial reporting quality. The time frame of this research is for a period of 10 years from the beginning of 1389 to the end of 1398 and the research sample includes 118 companies listed on the Tehran Stock Exchange. Two types of investor behaviors in this study are investigated, which include investor sentiment and herding behavior. The results of the research using multivariate regression models indicate that the investors' behavioral biases have a significant and direct effect on the future stock price crash risk . The financial reporting quality also affects the relationship between investors' behavioral biases and the future stock price crash risk.