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Information Disclosure Quality, Earnings Management and Stock Price Cash Risk: Evidence from China

In: Proceedings of the 2022 2nd International Conference on Financial Management and Economic Transition (FMET 2022)

Author

Listed:
  • Qi Wang

    (Macau University of Science and Technology, Department of Accounting and Finance)

  • An Zhai

    (Macau University of Science and Technology, Department of Decision Sciences)

  • Qingyue Pang

    (Macau University of Science and Technology, Department of Decision Sciences)

  • Haoyi Wang

    (Macau University of Science and Technology, Department of Decision Sciences)

  • Xuanqi Chu

    (Macau University of Science and Technology, Department of Accounting and Finance)

Abstract

Information disclosure plays an important role in financial market, which has a substantial impact on the earing management and stock price crash risk. The quality of information disclosed is manipulated by insider’s selective disclosure, rendering falsifications in earing management and increasing the stock price crash risk. Whether this phenomenon exists in emerging markets such as China is an imperative empirical question. Therefore, we examine two hypotheses based on the managerial entrenchment theory. Our data is collected from China Stock Market and Accounting Research dataset (CSMAR). Referring to previous literature, we construct two measurements to capture the stock price crash risk for each listed firm, where one is NCSKEW and the other one is DUVOL. Also, we use a two-way fixed effect model (FEM) to estimate the parameters after controlling the individual-specific effect at the firm-level and the time effect. According to the regression result we find that the information quality is negatively related to the earnings management. Furthermore, we find that the higher the quality of disclosure is, the lower the risk of stock price crash is. Our findings make contributions to corporate governance and provide the direct enlightenment that mangers need to enhance the quality of information disclosure.

Suggested Citation

  • Qi Wang & An Zhai & Qingyue Pang & Haoyi Wang & Xuanqi Chu, 2023. "Information Disclosure Quality, Earnings Management and Stock Price Cash Risk: Evidence from China," Advances in Economics, Business and Management Research, in: Vilas Gaikar & Min Hou & Sikandar Ali Qalati (ed.), Proceedings of the 2022 2nd International Conference on Financial Management and Economic Transition (FMET 2022), pages 622-633, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-054-1_68
    DOI: 10.2991/978-94-6463-054-1_68
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