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Macroeconomic Factors and Stock Price Crash Risk: Do Managers Withhold Bad News in the Crisis-Ridden Iran Market?

Sustainability, 2021-04, Vol.13 (7), p.3688 [Peer Reviewed Journal]

2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 2071-1050 ;EISSN: 2071-1050 ;DOI: 10.3390/su13073688

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  • Title:
    Macroeconomic Factors and Stock Price Crash Risk: Do Managers Withhold Bad News in the Crisis-Ridden Iran Market?
  • Author: Moradi, Mahdi ; Appolloni, Andrea ; Zimon, Grzegorz ; Tarighi, Hossein ; Kamali, Maede
  • Subjects: Economic crisis ; Economic factors ; Economic justification ; Efficient markets ; GDP ; Gross Domestic Product ; Hypotheses ; Inflation ; Investments ; Macroeconomics ; News ; Operating leverage ; Price increases ; Purchasing power ; Risk ; Risk management ; Sanctions ; Social responsibility ; Stock exchanges ; Unemployment
  • Is Part Of: Sustainability, 2021-04, Vol.13 (7), p.3688
  • Description: The present study aims to investigate the effects of macroeconomic variables on stock price crash risk in the economically uncertain conditions of Iran’s market. This study also seeks to examine whether there is a significant relationship between some firm characteristics and falling stock prices. The sample of the study includes 152 Iranian companies listed on the Tehran Stock Exchange (TSE) between 2014 and 2019. Furthermore, the research model has been estimated using a fixed effect pattern, and the DUVOL (down-to-up volatility) measure is defined as a proxy for stock price crash risk. Consistent with our expectations, the results show that there is a positive association between the inflation and unemployment rates and stock price crash risk, whereas the GDP and exchange rates are correlated negatively with crash risk. In fact, with rising inflation and unemployment, on the one hand, the amount of savings and the purchasing power of the people have decreased, and on the other hand, it has reduced the sales of companies due to the increase in the pricing of manufactured products. In Iran’s economically uncertain situation due to sanctions, managers are trying to overstate financial performance and conceal bad news to have better access to financing; so, when the total amount of bad news accumulated over time reaches a tipping point, it leads to a stock crash. It also appears that when the exchange rate rises, Iranian investors prefer to buy companies’ shares to maintain the purchasing power of their money. Outcomes also confirm that larger firms and those with higher Return on Assets (ROA) are more sensitive to crash risk.
  • Publisher: Basel: MDPI AG
  • Language: English
  • Identifier: ISSN: 2071-1050
    EISSN: 2071-1050
    DOI: 10.3390/su13073688
  • Source: GFMER Free Medical Journals
    ROAD: Directory of Open Access Scholarly Resources
    ProQuest Central
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