Does securities regulation improve transparency? : an examination of the effects of EU's transparency directive on stock price informativeness, crash risk, and financial reporting quality

2012 ◽  
Author(s):  
Olena V. Watanabe
Keyword(s):  
Financial Reporting ◽  
Stock Price ◽  
Reporting Quality ◽  
Securities Regulation ◽  
Financial Reporting Quality ◽  
Crash Risk ◽  
Price Informativeness ◽  
Stock Price Informativeness ◽  
Transparency Directive

Related-Party Transactions and Stock Price Crash Risk: Evidence from China

2021 ◽  
pp. 2150020
Author(s):  
Ahsan Habib ◽  
Haiyan Jiang ◽  
Donghua Zhou
Keyword(s):  
Financial Reporting ◽  
Stock Price ◽  
Reporting Quality ◽  
Positive Association ◽  
Financial Reporting Quality ◽  
Crash Risk ◽  
Future Price ◽  
Accounting Data ◽  
Related Party Transactions ◽  
Representational Faithfulness

This paper investigates the association between related-party transactions (RPTs) and stock price crash risk in China. Our investigation is motivated by the controversy in the RPT literature over whether RPTs are value enhancing or opportunistic. Through the lens of stock price crash risk, we reveal that RPTs may violate the arm’s-length assumption of regular market-based transactions, impairing the representational faithfulness and verifiability of accounting data and, consequently, increasing the risk of future price crash. Importantly, we find that this detrimental economic consequence of RPTs is driven by abnormal RPTs that are opportunistic in nature. Our analyses also extend to operating RPTs, related-party loans, and two types of opportunistic RPTs: tunneling and propping. The positive association between RPTs and stock price crash risk is not mediated by financial reporting quality, suggesting that the risk factors associated with RPTs are operational. Our main results remain robust to a series of tests done to address the potential endogeneity between RPTs and stock price crash risk.

Foreign Investors, External Monitoring, and Stock Price Crash Risk

2019 ◽  
Vol 35 (4) ◽  
pp. 829-853
Author(s):  
Jeong-Bon Kim ◽  
Xiaoxi Li ◽  
Yan Luo ◽  
Kemin Wang
Keyword(s):  
Financial Reporting ◽  
Stock Price ◽  
Reporting Quality ◽  
Crash Risk ◽  
Accrual Quality ◽  
Foreign Investors ◽  
External Monitoring ◽  
Risk Reducing ◽  
Local Firms

We investigate whether foreign investors help to reduce local firms’ future stock price crash risk through their external monitoring. We find that the entrance of foreign investors is associated with a significant reduction in local firms’ future crash risk. Further investigation reveals that foreign investors help to improve local firms’ financial reporting quality from the perspectives of accrual quality, conservatism, and annual report tone management. The evidence is consistent with our conjecture that foreign investors play an important external monitoring role, which reduces managerial bad-news hoarding and thereby lowers local firms’ future crash risk. We also find that the crash risk–reducing role of foreign investors is more pronounced when foreign investors are more familiar with the institutional background of the host country, when they have stronger incentives to monitor local firms, and when local firms have higher governance efficacy. A variety of robustness checks reveals that our results are unlikely to be driven by potential endogeneity.

scholarly journals Transparency Regulation and Stock Price Informativeness: Evidence from the European Union's Transparency Directive

2019 ◽  
Vol 18 (2) ◽  
pp. 89-113 ◽  
Author(s):  
Olena V. Watanabe ◽  
Michael J Imhof ◽  
Semih Tartaroglu
Keyword(s):  
Stock Price ◽  
Stock Return ◽  
Data Availability ◽  
Price Informativeness ◽  
Financial Reports ◽  
Corporate Transparency ◽  
Financial Disclosures ◽  
Stock Price Informativeness ◽  
Transparency Directive ◽  
Jel Classifications

ABSTRACT We examine changes in stock price informativeness following the European Union's Transparency Directive (TPD). The TPD, implemented by country between 2007 and 2009, enhanced corporate transparency through mandating regular firm financial disclosures and facilitating the dissemination of financial reports. Using stock return synchronicity as a proxy for stock price informativeness, we find that price informativeness improved following implementation of the TPD. This improvement was more pronounced in countries with strong regulatory environments than those with weak regulatory environments. We additionally examine a later amendment to the TPD that eliminated the requirement of quarterly financial disclosures and document an increase in stock return synchronicity following the amendment. Our findings support prior research suggesting that transparency regulations improve financial information. JEL Classifications: F30; G15; G30; M4. Data Availability: Data are available from the sources cited in the text.

The Impact of Going Concern on Financial Reporting Quality: Evidence from Vietnam

2018 ◽  
Vol 34 (3) ◽  
Author(s):  
Phung Anh Thu ◽  
Nguyen Vinh Khuong
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Financial Distress ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Viet Nam ◽  
Listed Firms ◽  
Going Concern ◽  
Debt Covenant

The investigation was conducted to contribute empirical evidence of the association between going concern and financial reporting quality of listed firms on the Vietnam stock market. Based on data from 279 companies listed on the HNX and HOSE exchanges in Vietnam for the period 2009-2015, the quantitative research. Results found that the relationship between the going concern and financial reporting quality of listed firms. Research results are significant for investors, regulators to the transparency of financial reporting information. Keywords Going concern, financial reporting quality, listed firms References Agrawal, K., & Chatterjee, C. (2015). Earnings management and financial distress: Evidence from India. Global Business Review, 16(5_suppl), 140S-154S.Bergstresser, D., & Philippon, T. (2006). CEO incentives and earnings management. Journal of Financial Economics, 80(3), 511–529.Burgstahler, D., & Dichev, I. (1997). Earnings management to avoid earnings decreases and losses. Journal of Accounting and Economics, 24(1), 99–126.Charitou, A., Lambertides, N., & Trigeorgis, L. (2007a). Earnings behaviour of financially distressed firms: The role of institutional ownership. Abacus, 43(3), 271–296.Chen, Y., Chen, C., & Huang, S. (2010). An appraisal of financially distressed companies’ earnings management: Evidence from listed companies in China. Pacific Accounting Review, 22(1), 22–41Dechow, P., & Dichev, I. (2002). The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors. The Accounting Review, 77, 35-59.DeFond, M., & Jiambalvo, J. (1994). Debt covenant violation and manipulation of accruals. Journal of Accounting and Economics, 17(1), 145–176.DeFond, M.L., & Park, C.W. (1997). Smoothing income in anticipation of future earnings. Journal of Accounting and Economics, 23(2), 115–139.Dichev, I., & Skinner, D. (2004). Large sample evidence on the debt covenant hypothesis. Journal of Accounting Research, 40(4), 1091–1123.Đinh Thị Thu T., Nguyễn Vĩnh K. (2016). Tác động của hành vi điều chỉnh thu nhập đến khả năng hoạt động liên tục trong kế toán: Nghiên cứu thực nghiệm cho các doanh nghiệp niêm yết tại Việt Nam, Tạp chí phát triển khoa học và công nghệ, Quí 3, tr.96-108.Đỗ Thị Vân Trang (2015). Các mô hình đánh giá chất lượng báo cáo tài chính, Tạp chí chứng khoán Việt Nam, 200, tr 18-21.Habib, A., Uddin Bhuiyan, B., & Islam, A. (2013). Financial distress, earnings management and market pricing of accruals during the global financial crisis. Managerial Finance, 39(2), 155-180.Jaggi, B., & Lee, P. (2002). Earnings management response to debt covenant violations and debt restructuring. Journal of Accounting, Auditing & Finance, 17(4), 295–324.Kasznik, R., (1999). On the association between voluntary disclosure and earnings management. Journal of accounting research, 37(1), pp.57-81.Lu, J. (1999). An empirical study of earnings management by loss-making listed Chinese companies. KuaijiYanjiu (Accounting Research), (9), 25–35.McNichols, M.F. and Stubben, S.R., (2008). Does earnings management affect firms’ investment decisions?. The accounting review, 83(6), pp.1571-1603.Selahudin, N.F., Zakaria, N.B., & Sanusi, Z.M. (2014). Remodelling the earnings management with the appear- ance of leverage, financial distress and free cash flow: Malaysia and Thailand evidences. Journal of Applied Sciences, 14(21), 2644–2661.Skinner, D.J., & Sloan, R. (2002). Earnings surprises, growth expectations, and stock returns or don’t let an earnings torpedo sink your portfolio. Review of Accounting Studies, 7(2/3), 289–312.Sweeney, A.P., (1994). Debt-covenant violations and managers' accounting responses. Journal of Accounting & Economics, 17(3): 281-308.Trần Thị Thùy Linh, Mai Hoàng Hạnh (2015). Chất lượng báo cáo tài chính và kỳ hạn nợ ảnh hưởng đến hiệu quả hoạt động của doanh nghiệp Việt Nam, Tạp chí phát triển kinh tế, 10, tr.27-50.Trương Thị Thùy Dương (2017). Nâng cao chất lượng báo cáo tài chính công ty đại chúng, Tạp chí tài chính, 1(3), tr.55-56.Uwuigbe, Ranti, Bernard, (2015). Assessment of the effects of firm’s characteristics on earnings management of listed firms in Nigeria, Asian Economic and Financial Review,5(2):218-228.

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