On the informational role of delayed good news : A firm-level crash risk evidence from Egypt / Abdelrahman Moustafa Ibrahim Moustafa ; Supervised Khairy Aly Moustafa Elgiziry

Thesis (M.Sc.) - Cairo University - Faculty of Commerce - Department of Business administration

There is controversy regarding the impact of delayed good news and role of information asymmetry in financial reporting on firm level crash risk. In the current exposure draft on the conceptual framework for financial reporting, information asymmetry is not considered a desired characteristic. The researcher presents a framework for the demand for conservatism to mitigate information asymmetry and thus, decreasing the potential exposure of firm-level crash risk. Kim and Zhang (2010) claim and provide evidence that conservatism is incrementally significant as a proxy of information asymmetry for predicting firm-level crash risk. If that claim is true, however, it will be sensible to argue that information asymmetry is non-trivial for firm-level crash risk assessment. Toward that end, this study directly tests if the timeliness of good news is trivial for firm-level crash risk assessment by specifying the firm-level crash risk in terms of a conservatism model. The study employs sample data from Egypt's capital market, which defines a setting dominated lately by firm-level crashes. Consistent with most studies, the researcher found evidence that timeliness of good news versus bad news explained by information asymmetry has a negative impact on increasing the probabilities of experiencing firm-level crash risk; however, when applying conservatism, the researcher found that conservatism reduces information asymmetry which eventually reduces the potential exposure to firm-level crash risk

Issued also as CD