Financial statement comparability and expected crash risk

Jeong Bon Kim; Leye Li; Louise Yi Lu; Yangxin Yu

doi:10.1016/j.jacceco.2015.12.003

Financial statement comparability and expected crash risk

Jeong Bon Kim, Leye Li, Louise Yi Lu, Yangxin Yu^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

249 Citations (Scopus)

Abstract

This study examines the impact of financial statement comparability on ex ante crash risk. Using the comparability measures of De Franco et al. (2011), we find that expected crash risk decreases with financial statement comparability, and this negative relation is more pronounced in an environment where managers are more prone to withhold bad news. We also provide evidence that comparability can mitigate the asymmetric market reaction to bad versus good news disclosures. Our results suggest that financial statement comparability disinclines managers from bad news hoarding, which reduces investors' perceptions of a firm's future crash risk.

Original language	English
Pages (from-to)	294-312
Number of pages	19
Journal	Journal of Accounting and Economics
Volume	61
Issue number	2-3
DOIs	https://doi.org/10.1016/j.jacceco.2015.12.003
Publication status	Published - 1 Apr 2016

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title = "Financial statement comparability and expected crash risk",

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AU - Yu, Yangxin

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AB - This study examines the impact of financial statement comparability on ex ante crash risk. Using the comparability measures of De Franco et al. (2011), we find that expected crash risk decreases with financial statement comparability, and this negative relation is more pronounced in an environment where managers are more prone to withhold bad news. We also provide evidence that comparability can mitigate the asymmetric market reaction to bad versus good news disclosures. Our results suggest that financial statement comparability disinclines managers from bad news hoarding, which reduces investors' perceptions of a firm's future crash risk.

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Financial statement comparability and expected crash risk

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