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Audit committee accounting financial expertise and stock price crash risk

Author

Listed:
  • Cho, Meeok
  • Kim, Hui Dong
  • Kim, Yewon

Abstract

This paper examines whether the accounting financial experts (hereafter, AFEs) among audit committee (hereafter, AC) members and the AFEs' specific types of expertise affect future firm-specific stock price crash risk. Using a Korean sample of 2142 firm-year observations, we classify AFEs into four specific types: AC members with auditing, academic, practical, or supervisory expertise. We find that AC accounting financial expertise in general, and AFE with auditing and supervisory expertise in particular, are likely to reduce firm-specific crash risk. In addition, we provide evidence that the interaction between AC members with different types of expertise has a significant effect on the stock price crash risk by utilizing synergies between them. Furthermore, our findings are more pronounced for firms with higher financial reporting opacity, higher information asymmetry, and the presence of accounting financial expertise in the AC chair position, and are robust to alternative research designs. Overall, our results highlight the roles of different types of AC accounting financial expertise in preventing crashes in stock price.

Suggested Citation

  • Cho, Meeok & Kim, Hui Dong & Kim, Yewon, 2023. "Audit committee accounting financial expertise and stock price crash risk," International Review of Financial Analysis, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finana:v:90:y:2023:i:c:s1057521923003642
    DOI: 10.1016/j.irfa.2023.102848
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    More about this item

    Keywords

    Audit committee; Accounting financial expertise; Stock price crash risk;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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