Corporate Strategy,External Audit And Stock Price Crash Risk

Corporations are the cornerstone of the capital markets.In the increasingly fierce market environment,the survival and development of enterprises are closely related to the strategy.Strategy is the enterprise in the face of fierce market change,serious environmental challenges,to seek long-term survival and sustained development of the overall planning and layout.The company strategy is the core of the operation of the company,which represents the future and direction of the company,and the management makes rational allocation of resources according to the company's strategy.There's a big difference between corporate strategy,pay design,and financial policy.Under the background of the modern enterprise system,the separation of ownership and operation makes the information asymmetry between the two parties due to the differences of demands.Jin and Myers explain the cause of the risk of stock price crash from the perspective of information asymmetry between the information release and the receiver.They believe that management is unwilling to disclose the company's negative news timely,because of self-interest.When the negative news accumulates to a certain degree and centralized release suddenly,the stock price will crash.The difference of corporate strategy directly affects the demands of management and provides opportunities for managers' opportunistic behaviors.Does the business decisions and financial policies generated by the corporate strategy potentially affect the company's value and risk? Is there a link between corporate strategy and stock price crashes? With the development of economy,external audit gradually becomes an important part of modern corporate governance,which can alleviate the agency problem of enterprises to a certain extent,supervise the "rent-seeking behavior" of management and other agency conflicts,improve the quality of accounting information,and reduce information asymmetry.But in practice,does high quality external audit reduce the risk of stock price crashes?Capital market is the platform of resources effectively deployed,which is an important channel for service entity economy.The orderly,smooth and healthy development of capital market is very important.However,short-term stock price soaring and slump exacerbated the turmoil in the capital market,especially stock crash formed by falling sharply.As an extreme phenomenon in the capital market,the stock price crash has not only damaged the interests of investors,but also discouraged their investment confidence and enthusiasm,which has brought serious negative impacts on the resource allocation and smooth development of the capital market.It is very important to protect the interests of investors,maintain the stability of the capital market and promote the healthy development of the entity economy.Based on this,we associate corporate strategy,external audit with stock price crash.On the basis of reviewing the existing literature,illustrated the principal-agent theory and the asymmetrical theory of information in detail.The financial data and the transaction data of the Shanghai and Shenzhen a-share of the stock market in 2007 and 2016,which is based on the principle of established,and then finally,we will select the sample of 13,195,and by building a regression model,we will examine the relationship between the strategy,audit supervision and the risk of stock price crash.We draw the following conclusions :(1)the corporate strategy is positively correlated with the risk of stock price crash,that is,the more aggressive the corporate strategy is,the higher the risk of stock price crash.We according to Bentley(2013)and SunJian(2016)metrics for corporate strategies.After controlling the accounting conservatism “C_SCORE”,information transparency “absDAC” and other control variables,perform a fixed effect regression analysis of panel data by control year and industry.The results show that the corporate strategy is positively correlated with the risk of stock price crash.We further divided the sample into state-owned enterprises and non-state-owned enterprises according to the equity nature.The study found that in the sample group of non-state-owned enterprises,the company strategy was significantly correlated with the risk of stock price collapse.(2)high-quality external audit is negatively correlated with the risk of stock price crash.We use the "top ten" accounting firms in China as measures to measure external audit quality,The regression results show that high quality external audit can reduce the risk of stock price crash.(3)we set up the intersection of corporate strategy and external audit,and studied the regulation effect of external audit on the risk relationship between corporate strategy and stock price crash.The results showed that high-quality external audit can effectively inhibit the influence of corporate strategy on the risk of stock price crash,especially in the non-state-owned sample group.At the same time,in the robustness test section,we changed the measurement method of the company's strategic indicators,and used the audit fee as an alternative variable to measure external audit quality.In order to eliminate the correlation between residual items,We conducted a clustering regression analysis to the samples,and the results showed that it was consistent with our hypothesis.At last,this paper summarizes the research conclusions of this paper and puts forward some Suggestions to the owners,external auditors and regulators.