Asset Redeployability and Stock Price Crash Risk
There is tension underlying whether asset redeployability, which refers to the salability of corporate capital assets, shapes crash risk. On one hand, asset redeployability enables managers to opportunistically exploit asset sales to manage earnings upwards to hoard bad news, which, in turn, increases future stock price crash risk. On the other hand, greater asset redeployability engenders liquidity benefits that should mitigate future stock price crash risk. We find that, on average, asset redeployability is positively associated with stock price crash risk, suggesting that relying on redeployable assets to orchestrate upward earnings undermines shareholders' interests. Reinforcing that asset sales earnings management explains the positive association between asset redeployability and stock price crash risk, we find that this association is stronger for firms experiencing greater internal and external pressure to manage earnings. We contribute to extant research by providing evidence implying that asset redeployability has a dark side stemming from managers' incentives to suppress bad news, particularly when internal and external forces motivate them to manage earnings upward
Year of publication: |
2019
|
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Authors: | Chen, Yangyang |
Other Persons: | Ng, Jeffrey (contributor) ; Pittman, Jeffrey (contributor) ; Saffar, Walid (contributor) |
Publisher: |
[2019]: [S.l.] : SSRN |
Subject: | Börsenkurs | Share price | Finanzkrise | Financial crisis |
Saved in:
freely available
Extent: | 1 Online-Ressource (53 p) |
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Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments August 29, 2019 erstellt |
Other identifiers: | 10.2139/ssrn.2988119 [DOI] |
Classification: | G12 - Asset Pricing ; G14 - Information and Market Efficiency; Event Studies ; G31 - Capital Budgeting; Investment Policy ; M41 - Accounting |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10012901714
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