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The Interactive Effect of Ownership Structure on the Relationship between Annual Board Report Readability and Stock Price Crash Risk

Author

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  • Mohsen Tavakoli Shandiz

    (Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad 917794895, Iran)

  • Farzaneh Nassir Zadeh

    (Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad 917794895, Iran)

  • Davood Askarany

    (Business School, Accounting and Finance, The University of Auckland, Private Bag, Auckland 92019, New Zealand)

Abstract

This study investigates the interactive effect of ownership structure on the relationship between annual board report readability and stock price crash risk in companies listed on the Tehran Stock Exchange (TSE). The negative skewness model was used to measure the crash risk of stock prices and the Fog index was used for determining the readability of the board of directors’ report. The ownership structure is examined in institutional ownership, significant managerial ownership, and family ownership. The data of companies listed on the TSE from 2013 to 2019 have been used. The statistical method of this research is multiple regressions and, to test the research hypotheses, the data panel model and the ordinary least squares method have been employed. Overall, this study provides new evidence to explain the reporting quality and the crash risk of stock prices from the lenses of the agency theory. It further investigates the interactive effect of ownership structure on the relationship between annual board report readability and stock price crash risk. The results show a significant correlation between the readability of the board of directors’ report and the crash risk of stock prices. Furthermore, the relationship between the readability of the board report and stock price crash risk is not affected by the ownership structure, including institutional ownership, significant managerial ownership, and family ownership. It can be inferred that an ownership structure, which includes institutional shareholders, significant shareholders, and family ownership, increases the supervision of managers and their reports, so they cannot keep adverse information from being released. This will ultimately improve the readability of their reports and reduce the risk of stock price crashes.

Suggested Citation

  • Mohsen Tavakoli Shandiz & Farzaneh Nassir Zadeh & Davood Askarany, 2022. "The Interactive Effect of Ownership Structure on the Relationship between Annual Board Report Readability and Stock Price Crash Risk," JRFM, MDPI, vol. 15(6), pages 1-17, June.
    • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:6:p:268-:d:839368
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    References listed on IDEAS

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    Cited by:

    1. Maryam Eghbal & Farzaneh Nassirzadeh & Davood Askarany, 2024. "The Relationship Between Non-additivity Valuations, Cash Flows and Sales Growth," Computational Economics, Springer;Society for Computational Economics, vol. 64(1), pages 429-459, July.
    2. Abbas Ali Daryaei & Davood Askarany & Yasin Fattahi, 2024. "Impact of Audit Fees on Earnings Management and Financial Risk: An Analysis of Corporate Finance Practices," Risks, MDPI, vol. 12(8), pages 1-22, August.
    3. Mona Parsaei & Davood Askarany & Mahtab Maleki & Ali Rahmani, 2024. "Risk Management in Product Diversification: The Role of Managerial Overconfidence in Cost Stickiness—Evidence from Iran," Risks, MDPI, vol. 12(10), pages 1-21, September.
    4. Mahla Afghahi & Farzaneh Nassirzadeh & Davood Askarany, 2024. "Exploring the impact of customer concentration on stock price crash risk," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.
    5. Davood Askarany & Mona Parsaei & Nilofar Ghanbari, 2024. "Business Strategy, Short-Term Debt, and Cost Stickiness," Computational Economics, Springer;Society for Computational Economics, vol. 64(3), pages 1913-1936, September.

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