Disaggregation Quality and Stock Price Crash Risk

Abstract

This study examines the relationship between disaggregation quality (DQ) and stock price crash risk We consider that higher financial statement disaggregation can decrease crash risk through preventing managers from hiding bad news and decreasing earnings discretion in financial statements Using the samples from 1991 to 2017 we provide strong evidence that DQ is negatively related to stock price crash risk Moreover we further research which benefits of DQ decreasing hidden bad news or decreasing discretion are central to decrease being crash prone We find that being more prone to the negative relationship between DQ and crash risk happens under more complex information environments while no significant effect exists under greater financial statement distortion The results confirm that the reduction of crash risk comes mainly from providing more information and further decreasing hidden bad news by disaggregation Our study informs firms managers standard setters and investors about the benefits of financial statement disaggregation to help them when making decisions

Date of Award	2020
Original language	English
Supervisor	Ting-Kai Chou (Supervisor)