Investigating the impact of financial reporting quality on the risk of stock price collapse with regard to the moderating role of corporate governance

Abstract

The purpose of this study is to investigate the effect of financial reporting quality on the risk of stock price collapse with regard to the moderating role of corporate governance in companies listed on the Tehran Stock Exchange. The quality of financial reporting has always been considered by the accounting profession as a criterion for the correct performance of accounting activities. It also indicates the accuracy and correctness of financial reports in expressing information related to the company's operations, especially expected cash flows, in order to inform investors. In addition to the significant losses it causes to investors' wealth, a stock price collapse also reduces their confidence in the capital market. One of the advantages of strong corporate governance is that it controls opportunistic behaviors of management and reduces such behaviors. The results of the study show that the quality of financial reporting has a significant negative relationship with the risk of stock price collapse of companies listed on the Tehran Stock Exchange. Also, institutional ownership and the percentage of non-executive directors as corporate governance criteria do not have a moderating role on the relationship between the quality of financial reporting and the risk of stock price collapse.