The Disclosure Of The Risks Of Material Misstatement And The Risk Of Stock Price Crash

The phenomenon of stock price crash is the result of the long-term development of the capital market.However.The frequent occurrence of such a phenomenon is bound to affect the long-term,stable and healthy development of capital market,which will cause the all-round negative impact for so many aspects.Therefore,the regulators,investors,academics and other stakeholders have paid universal attentions to it.Then,exploring the affecting factors of stock price crash and find out the corresponding measures according to it to reduce the occurrence of the stock price crash is particularly important.The personalized audit report require the disclosure of the possible existing risks of material misstatement of the key audit matters paragraph in the audit report that the auditors identified in the process of auditing and communicated with the auditees' governance.Based on the theory of the occurrence of stock price crash risk,the stock price will collapse when the bad news accumulate to a certain degree.And the disclosure of the possible existing risks of material misstatement of the auditees belongs to bad news in the theory,then do the disclosure of the bad news identified,the number of the disclosed risks,and the content of the disclosed risks have an influence on the risk of stock price crash?Given to it,this article use the financial data,market transaction data of UK FTSE350 constituent companies from 2013 to 2015 as a sample to discuss the relationship between the disclosure of the risks of material misstatement and the risk of future collapse of the stock price by adopting the method of empirical study combined with the normative study on the basis of careful combing previous literature.Finally,892 observation variables were selected to examine the relationship between them by the use of the multiple linear model.Empirically found that:(1)the disclosure of the risks of material misstatement in the personalized audit report is negatively related to the risk of share price crash in the future,that is to say,the execution of the disclosure of the material misstatement risks of the auditees,the smaller the risk of future stock price crash;(2)the number of the disclosure of the risks of the material misstatement of the auditees in personalization audit report is negatively related to the future crash risk of the stock price,in other words,the more of the disclosure of the risks of the material misstatement risks of the auditees in personalization audit report,the lower risk of stock price crash in the future;(3)the content of the disclosure of the risks of the material misstatement(non-big five risks)of the auditees in personalization audit report is negatively related to the stock price crash risk,that is,the higher the ratio of the disclosure of the risks of the material misstatement except for the "asset impairment","income","tax","acquisition/disposal/reorganization" and "investment",the lower risk of future stock price collapse.The specific arrangement of this paper include: the first chapter is the introduction,which introduces the research background,puts forward the research question,the purpose and the significance of such a study,defines the relevant concepts,describes the content and framework of the research,illustrates the research ideas and study methods,then points out the innovation points of this paper;The second chapter introduces the three theoretical support of this research: the principal-agent theory,asymmetric information theory and the efficient market hypothesis theory,and then combs the literatures of the material misstatement risks and stock price crash risk respectively at home and abroad;The third chapter of this article are the research hypotheses and research design,which puts forward the hypothesis of this article on the basis of theoretical analysis,introduces the source of data of this study,constructs the multivariate linear regression model of this paper on the basis of reference to stock price crash risk metrics,and expounds the definition of the selected variables and the corresponding reasons in detail;The fourth chapter of empirical test and analysis part in this paper,includes: descriptive statistics,correlation analysis,the tests of heteroscedasticity and multicollinearity of the multivariate linear regression model,and then analysis the regression results and the robustness of regression to guarantee the reliability of the results;The fifth chapter the conclusion and the suggestion to reduce the price in the future crash risk,maintain the stability of the securities market to the reform of audit report of our country.Finally,we point out the limitations of this study and the direction of future research.The innovation of this paper is the empirical research of the relationship between the disclosure of the risks of the material misstatement of the auditees in personalization audit report and the future crash risk of the UK FTSE350 constituent companies,which is based on the big background of audit report reform.