Financial constraints and stock price crash risk

Document Type : Research Paper

Authors

1 Department of Accounting, Qaenat Branch, Islamic Azad University, Qaenat, Iran

2 Department of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran

10.22075/ijnaa.2023.29734.4244

Abstract

The main objective of the present study is to assess the relationship between financial constraints and stock price crash risk. In other words, this paper seeks to answer “whether financial constraints can lead to the decline of stock price crash risk or not”. The study method is descriptive correlation based on published information from listed firms on the Tehran Stock Exchange from 2012 to 2019, with a selected sample that includes 119 firms (952 observations). The method used for hypothesis testing is linear regression using the integrated data. The obtained results from hypothesis testing show a positive and significant relationship between financial constraints and stock price crash risk, which means the more financial constraints in Iranian business firms, the higher the risk of stock price crash. Since this paper is carried out in an emergent financial market, like Iran, that is highly competitive with severe economic sanctions and high inflation, it can provide helpful information in this area for the readers and contribute to the development of science and knowledge.

Keywords

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Articles in Press, Corrected Proof
Available Online from 12 March 2024
  • Receive Date: 26 January 2023
  • Accept Date: 09 April 2023