Are Corporate General Counsels in Top Management Effective Monitors? Evidence from Stock Price Crash Risk. Issue 2 (15th March 2021)

• Record Type: Journal Article
• Authors: Al Mamun, MD; Balachandran, Balasingham; Duong, Huu Nhan; Gul, Ferdinand A
• Is Part Of: European accounting review. Volume 30:Issue 2(2021)
• Page Start: 405
• Page End: 437
• Publication Date: 2021-03-15
• Subjects: Corporate general counsel -- Discretionary accruals -- Opaque financial reports -- Stock price crash risk; M41 -- M51 -- G34 -- G14; Accounting -- Europe -- Periodicals; Accounting -- Periodicals; Comptabilité -- Europe -- Périodiques; Comptabilité -- Pays de l'Union européenne -- Périodiques; 657.094
• DOI: 10.1080/09638180.2020.1763819
• Languages: English
• ISSNs: 0963-8180

Abstract

Abstract: We find that firms with a top management counsel ( TMC ) have lower stock price crash risk than other firms. We further show that firms with a TMC issue more negative relative to positive earnings guidance and use more negative relative to positive words in their annual report filings, compared to firms without a TMC . TMC s are more effective in mitigating crash risk when they serve on the board. Our findings support the monitoring role of TMC s in mitigating bad news hoarding, which, in turn, contributes to the reduction in crash risk.