A Study On Earnings Smoothing And Stock Price Crash Risk Of Listed Companies

Earnings Smoothing is a common accounting phenomenon in the capital market.More and more listed companies will use earning smoothing as an important business management objectives with the development of capital markets.There are two diametrically opposed different perceptions about the economic consequences of earnings smoothing surrounding the information quality in academia.Earnings Smoothing is beneficial to the quality of enterprise information from the effective contract view.But another view is the opportunism which believes that it can harm to the information quality.The stock price crash risk is due to the hidden of bad news from the academic mainstream view.This theory comes from the principal agent theory and the information asymmetry theory.The market can not find bad news in time because the company's self-management behavior.It can cause the stock pirce crash risk when the bad news exceeds the threshold and releases to the market.So the core factor of crash risk is the information quality.Based on the above theory and phenomenon,this article use the data of A-share listed companies in China in 2007-2016 through empirical research and mainly talks about the following questions.The impact of earning smoothing on the stock price crash risk.On this basis,the article studies the role of external governance in the company.mainly including grouping according to the holding motive and studying the difference between the two companies in the heterogeneous institutional investors holding the listed companies.The regulatory effect of the external audit quality.The impact of the information environment.The first chapter is the introduction.In this section we introduced the research background,meaning,purpose and research methods.The second chapter is the theoretical basis and literature review.In this section we summarize three theoretical foundations of the stock price crash risk.We reviews the existing research from three aspects:earning smoothing,stock price crash risk and external corporate governance.The third chapter is the hypothesis and research program design.On the basis of theoretical and literature research,we presents four research hypotheses.We defines the method of measuring variables and design empirical model according to the study hypothesis.The fourth chapter is the empirical analysis.We describe the characteristics of each variable data.The OLS regression was used for the empirical model and conducted a robustness test.Chapter five is the research results and policy recommendations.Finally is the conclusion of this paper.Through the study we found the following conclusions: Earnings Smoothing aggravates the future stock price crash risk.The relationship different performance due to the different nature of institution investors.The “big 4”can represent the good quality of external audit that can also reduce the positive relationship between the earnings smoothing and stock price crash risk.The positive relationship between the earnings smoothing and stock price crash risk performance in different information environment.The conclusion of this paper is established after we control endogenous problems,change the method of measuring variables,extend the forecast time and increase the control variables.The characteristics of this article is studing the causes of the stock price crash risk from the perspective of the economic consequences of earning smoothing.This article enriched the causes of the stock price crash risk and expanded the research results of the economic consequences of earning smoothing.