Critical audit matters and stock price crash risk

Frontiers of Business Research in China

Xiaoqiang Zhi¹  Zuming Kang² 

[1] Department of Finance, Business School, Renmin University of China, Room 0204, Chongde East Building in Renmin University of China, No.59 Zhongguancun Street, Beijing, Haidian District, China;Department of Finance, Business School, Renmin University of China, Room 0439, Pinyuan 3 Building in Renmin University of China, No.59 Zhongguancun Street, Beijing, Haidian District, China;

关键词: Critical audit matters (CAMs);    Crash risk;    Incremental information;    New audit standard;    Corporate-idiosyncratic CAMs;   

DOI  :  10.1186/s11782-021-00102-z

来源: Springer

【 摘 要 】

Using manually collected data on the number and category of critical audit matters (CAMs) in the period 2016–2017, we investigate the hitherto unexplored questions of whether CAMs affect firm-specific crash risk, how CAMs influence crash risk in the Chinese capital market, and recognize CAMs that contain incremental information. Our findings are as follows: (1) Crash risk decreases after implementing the new audit standard requiring the disclosure of CAMs; (2) CAMs release negative information and change the capital market information environment; (3) only corporate-idiosyncratic CAMs contain incremental information; (4) crash risk is mitigated only by CAMs disclosed by companies with a high shareholding of institutional investors. The main conclusion of our study is a positive assessment of the new audit standard and of CAMs in terms of protecting the interests of investors and strengthening the stability of the capital market to provide a new perspective for supervising the implementation of the new audit standard.

【 授权许可】

CC BY