The Impact of Opacity in Financial Reporting on the Future Stock Price Crash Risk of Listed Companies in Tehran Stock Exchange

Financial information transparency always has been one of the most influencing factors in determining investment strategy in financial markets. Despite this fact, managers as those who are responsible for preparing the financial statements, often have incentives to falsify financial information to pay for their own interests. One of manager’s actions that results in opaque financial reporting, is earning management. In process of earning management, managers try to accumulate bad news within the firm and do not disclose them. When the accumulation of bad news reaches a tipping point, it will all be released to market at once, leading to stock price crash. So, one could expect that, opacity in financial reporting increases future stock price crash risk. The main purpose of this study is to investigate the relationship between opacity in financial reporting and the future stock price crash risk. Results showed that, there is a positive relationship between opacity in financial reporting and future stock price crash risk. So, it could be concluded that increase of opaque financial reporting, result in increasing future stock price crash risk. The results also showed that when there information asymmetry among managers and outside investors, the impact of opaque financial reporting on increasing future stock price crash risk is increased.