Organizational Dynamics: Evidence Of Audit Quality, Stock Price Crash Risk, And Board Of Directors In An Emerging Market

Abstract

This study focuses on the company dynamics through examination of the influence of audit quality on the stock price crash risk (SPCR) of organizations in Pakistan. It also delves into whether the quality of audit of organizations reduces stock price crash risks for the organizations listed on the Pakistan Stock Exchange by reducing the effect of bubble bursts. Thereby attracting significant investments from the shareholders and potential stakeholders. The research employs the agency theory to support the study's framework and focuses on the role of the board of directors that may affect this relationship. The research findings show that the quality of audit of the listed company minimizes the stock price crash risk. When I use board of directors as a moderator on the relationship between audit quality and stock price crash risk, I find that the intervention of the board of directors appears to enhance the stock price crash risk by creating a bubble in the market.