Model of the Impact of Tax Avoidance, Discretionary Accruals, and Financial Constraints on Stock Price Crash Risk

Abstract

Stock price crash refers to a large, negative, abnormal, and sudden change in stock returns occurring in the absence of a major economic event. As it endangers the primary objective of individual investments, which is to generate profit, its escalation can lead to investor pessimism and capital withdrawal from the stock market. Considering this, the aim of this article is to present a model of the impact of tax avoidance, discretionary accruals, and financial constraints on stock price crash risk. This research is correlational in nature, utilizing regression analysis to determine model coefficients. Furthermore, based on its purpose, this research is categorized as applied research. The statistical population of this study includes all companies listed on the Tehran Stock Exchange during the period from 2012 to 2021, comprising 1,250 firm-year observations. The results indicate that corporate governance moderates the effect of tax avoidance on the future stock price crash risk. Additionally, corporate governance also moderates the effect of discretionary accruals on future stock price crash risk. Discretionary accruals have a significant effect on future stock price crash risk, and financial constraints also have a significant effect on future stock price crash risk. The findings reveal that corporate governance, as a moderating variable, does not influence the relationship between financial constraints and stock price crash risk.