| Stock price crash risk is a situation in which stock prices fall more sharply than investors expectation.Stock price crash is a disaster in the capital market,which will seriously hit market confidence,hinder the smooth operation of the financial market,and further have a negative impact on the real economy.Therefore,the risk of stock price crash has been one of the hot topics studied by financial scholars.The existing literature believes that the main reasons for the stock price collapse are the management’s behavior of covering bad news of the company out of self-interest and the information asymmetry between investors and the company.A lot of research has been carried out on the influencing factors of the stock price collapse risk,including the behavior of shareholders and management,heterogeneous beliefs of investors,optimistic bias of analysts,media reports,etc.,and a wealth of research results have been formed.However,there is a lack of research on the impact of internal control quality on stock price crash risk.In fact,internal control can not only supervise the operation and management activities of the company,inhibit the opportunistic behavior of the management,increase the difficulty and cost of the management of disk capture,and alleviate the agency problem,it can also reduce the information asymmetry by improving the efficiency of information communication and the quality of accounting information and forcing the company to carry out internal control information disclosure.Therefore,this paper explores the relationship between the quality of internal control and the risk of stock price collapse,which enriches the research on the influencing factors of stock price collapse risk.This paper summarizes the literature on the influencing factors of stock price collapse risk and the economic consequences of internal control.Based on the principal-agent theory and information asymmetry theory,this paper analyzes the impact of internal control quality on the risk of stock price collapse,as well as the intermediary role of cash dividend payment rate and accrued earnings management,and further explores the possible regulatory effect of overseas background of senior executives and financial distress on the relationship between internal control quality and stock price collapse.Based on the above theoretical analysis,this paper puts forward a series of research hypotheses.Based on the above theoretical analysis,this paper puts forward a series of research hypotheses,and takes all non-financial listed companies in Shanghai and Shenzhen Stock markets from 2010 to 2020 as the research object,and adopts "Dubo · Internal Control Index of Chinese Listed Companies" to measure the quality of internal control.The negative skewness return coefficient(NCSKEW)and the up and down volatility ratio of return rate(DUVOL)are selected as the measures of stock price crash risk,and the corresponding model is constructed for empirical test.The results show that:(1)The quality of internal control is significantly negatively correlated with the risk of stock price collapse,that is,improving the quality of internal control can effectively reduce the risk of stock price collapse.This conclusion still holds after replacing the internal control quality index,replacing the stock price crash risk index,removing the samples from the 2015-2016 stock market crash period,and considering the endogenous problem.(2)Cash dividend payment ratio and accrual earnings management have a significant mediating effect in the relationship between internal control quality and stock price crash risk.Improving internal control quality can reduce stock price crash risk by increasing cash dividend payment ratio and reducing accrual earnings management.(3)The negative correlation between the quality of internal control and the risk of stock price crash is more significant when the company’s senior executives do not have overseas background and are in greater financial distress.Finally,this paper puts forward some suggestions based on above conclusions and reflects on the limitations of this paper.This paper takes the quality of internal control as the explanatory variable to explore its impact on the crash risk of individual stocks,directly studies the impact of the quality of internal control itself on the crash of stock prices,and pays attention to its role in the capital market,which can enrich the research on the economic consequences of internal control.At the same time,this paper also studies the path and regulatory effect of internal control quality affecting stock price collapse risk,examines the intermediary role of cash dividend payment rate and accrued earnings management in the process of internal control quality affecting stock price collapse risk,and further explores the relationship between executives’ overseas background and corporate financial difficulties whether they will affect internal control quality and stock price collapse risk.It broadens the relevant research on the quality of internal control and the risk of stock price collapse. |
