Asmaa Samir
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Financial distress and stock price crash risk in Egyptian firms
Asmaa Samir , Medhat AbdElRasheed Nofal , Ahmed Rashed , Manal Khalil doi: http://dx.doi.org/10.21511/imfi.20(3).2023.26Investment Management and Financial Innovations Volume 20, 2023 Issue #3 pp. 311-320
Views: 472 Downloads: 137 TO CITE АНОТАЦІЯEconomic policy uncertainty intensified as a result of the global financial crisis. To overcome these obstacles, firms handle issues with financial distress and crash risk more proactively. This paper offers new insights into the relationship between financial distress and crash risk on the Egyptian stock market during the period of 2014–2021 and presents how managers strengthen the bad news hoarding mechanism to their advantage. Data were collected via financial statements and reports obtained from the Thomson Reuters database using 824 annual observations of 103 Egyptian firms via the generalized method of moments and ordinary least squares. Results show a strong positive impact of financial distress on crash risk using OLS and GMM. Results support the role of managerial opportunism to cover up bad news that undermines a firm’s economic fundamentals. The findings support an agency theory of how financial distress affects crash risk. The findings support conducting robust tests for alternative financial distress and crash risk measures.
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