Chen, Jun
[Verfasser:in]
;
Chan, Kam C.
[Sonstige Person, Familie und Körperschaft];
Dong, Wang
[Sonstige Person, Familie und Körperschaft];
Zhang, Feida
[Sonstige Person, Familie und Körperschaft]
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments October 30, 2015 erstellt
Beschreibung:
This paper examines the role played by internal control and its five components (i.e., control environment, risk assessment, control activities, information and communication, and monitoring) in alleviating future stock price crash risk. Using a unique dataset from China, we find evidence that internal control is negatively associated with future stock price crash risk. Specifically, control environment and monitoring are significantly and negatively associated with future stock price crash risk. Moreover, the negative association between internal control and crash risk is significantly more pronounced in firms with weak internal and external governance (i.e., audited by non-Big 4 auditors, located in provinces with low market development, and less conservative in accounting) and with poor ability to mitigate impacts of extreme negative events (i.e., non-state-owned enterprises). Our study highlights the delicate role of internal control as a mechanism in preventing crash of stock price