Affiliation:
1. Economics & Finance Department Gulf University of Science and Technology Hawally Kuwait
2. Department of Accounting College of Business, Zayed University Dubai United Arab Emirates
3. School of Accounting and Finance The Hong Kong Polytechnic University Hong Kong Hong Kong
Abstract
AbstractHow does a firm's asset redeployability affect its future stock price crash risk? Asset redeployability, which refers to the ease of selling corporate assets, allows managers to opportunistically exploit asset transactions to manage earnings to hoard bad news, thereby increasing future crash risk. Using a large sample of US firms, we find that firms with higher asset redeployability are more likely to experience a future stock price crash. We further find that this positive association is stronger for firms experiencing greater internal and external pressure to manage earnings. Our study highlights that relying on redeployable assets to orchestrate earnings undermines shareholders' interests, particularly when internal and external pressures incentivize upward earnings management.