Financial Statement Comparability and the Expected Crash Risk of Stock Prices

Document Type : Research Paper


Department of Accounting, Tehran South Branch, Islamic Azad University, Tehran, Iran


The purpose of this study is to explain the relationship between the comparability of financial statements as a qualitative financial reporting feature with the expected risk of stock price crash. The statistical population of this research includes all companies admitted to Tehran Stock Exchange. In order to achieve the research goal, 81 companies were selected for the period between 2010 and 2017 as a sample of the study. The research aimed at being an applied research and the research method is in terms of the nature and content of the correlation. The research has been performed in the framework of deductive-deductive reasoning and for analysis of the research hypothesis; statistical analysis of the logistics has been assisted. The results of the research hypothesis test showed a significant and negative relationship between the comparability of financial statements and the expected crash in stock prices.


[1] Ahmed, S. A., Neel, M., & Safdar I. Evidence on the Association between Accounting Comparability and Stock Price Efficiency. 10th Annual Lone Star Accounting Research Conference, United States. University of Texas at Dallas, 2017, January 30.
 [2] Anenn, P.C., Antoniou, C., Horton, J., Louca, C., Corporate Governance and Stock Price Crashes. Working Paper. Cyprus University of Technology and Exeter University Business School, 2016.
[3] Blanchard, O., (Nearly) Nothing to fear but fear itself. The Economist, 2007, January 29th. Bleck, A., Liu, X., Market transparency and the accounting regime. Journal of Accounting Research, 2009, 45(2), P.229-256.
[4] Bollerslev, T., Todorov, V., Tails, fears, and risk premia. Journal of Finance, 2011, 66 (6), 2165-2211.
[5] Campbell, J., & Yeung, P. E. Comparability, Investor Sophistication, and Contagion Effects. Financial Accounting and Reporting Section Midyear Meeting, San Diego, California, 2013.
[6] Chen C., Kim J .B, Yao L, Earnings Smoothing and Stock Price Crash Risk,2017,
[7] Chen, C.-W., W. Collins, D. Kravet, T., D. Mergenthaler, R. Financial statement comparability and the efficiency of acquisition decisions. Working Paper, University of Iowa and University of Texas at Dallas. 2013, Available at:, 2169082.
[8] Chen, J., Hong, H., Stein, J. Forecasting Crashes: Trading Volume, Past Returns, and Conditional Skewness in Stock Prices. Journal of Financial Economics, 2001, 61, P.345–381.
[9] Choi, J.-H., Choi, s. A. Myers, L., Ziebart, D., Financial Statement Comparability and the Ability of Current Stock Returns to Reflect the Information in Future Earnings, 2014, available at:,2337571.
[10] De Franco, G., Kothari, S., & S. Verdi, R., The benefits of financial statement comparability. Journal of Accounting Research, 2011, 49(4), P.895-931.
[11] Drachshi, R., Badavar Nadini, Y., Hassanzadeh Brothers, R., The Impact of Ownership Structure and Financial Structure on Financial Finance Comparison Capacity, Audit Quarterly, 2012, 6, P.23-34 (in Persian).
[12] Financial Accounting Standards Board (FASB). Statement of Financial Accounting Concepts No. 8: Conceptual Framework for Financial Reporting, 2010.
 [13] Foroughi, Daryoosh, Amin Sakiany, Eeffect of Debt deadline on the Expected Crash Risk of Stock Prices, quarterly journal of accounting investigations. 2016, 5, P.99-116.
[14]Hong, H., Stein, J. C., Differences of opinion, short-sales constraints, and market crashes. Review of Financial Studies, 2003, 16(2), 487-525.
[15] Hutton, A.P., Marcus, A.J., Tehranian, H., Opaque Financial Reports, R2, and Crash Risk. Journal of Financial Economic, 2009, 94, P.67-87.
[16] Jeong-Bon Kim. Leye Li, Financial Statement Comparability and Expected Crash Risk, 2015, 12, P.23-45.
[17] Jin, L., Myers, S., R2 around the world: New theory and new tests. Journal of Financial Economics, 2006, 79 (2), 257-292.
[18] Kim, J.-B., Li, Y., Zhang, L, Corporate tax avoidance and stock price crash risk: Firm-level analysis. Journal of Financial Economics. 2011,100, P.639-662.
[19] Kim, J. B., Zhang, L., Financial reporting opacity and expected crash risk: Evidence from implied volatility smirks. Contemporary Accounting Research, 2014, 31(3), 851-875.
[20]Kothari, S. P., Shu, S., Wysocki, P. D., Do managers withhold bad news? Journal of Accounting Research, 2009, 47 (1), 241-276.
[21] Rahnama RoodPoshti, Fereydoon, Vakilifard, Hamidreza, Study accounting style and comparability of financial statements quarterly journal of management accounting, 2015, 25, P.67-99.
 [22] Santa-Clara, P., Yan, S., Crashes, volatility, and the equity premium: Lessons from S&P 500 options. Review of Economics and Statistics, 2010, 92 (2), 435-451.
[23] Sherzai, Mohammad Reza and Abidine Barzegar Khondaziz. Information asymmetry and the role of conservative information, examination of different perspectives on conservatism, Journal of Accountant, 2009, 210, P. 63-56.
 [24] Tehran Stock Exchange,
[25] Volk, Harry I, Accounting theories. Book of Theory Accounting, Chapter Four, 1930, 144-145.