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We investigate the effects of financial quality and internal control on stock price crash risk by using the listed companies in A-share market from 2007 to 2017. The result shows that financial quality reduces the risk of stock price crisis. Moreover, the relationship can be enhanced by improving the internal control. Further, considering the heterogeneity, financial quality has a stronger influence on new companies, while internal control has a stronger influence on mature companies. For companies with larger agency conflict between the management and shareholders, internal control can effectively reduce stock price crash risk.
Xue et al. (Mon,) studied this question.
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