The Impact of Accounting Information Quality on the Relationship between Investor Sentiment and Stock Price Crash Risk: Evidence from Firms Listed in the Egyptian Stock Exchange

This study examines the relationship between investor sentiment and stock price crash risk and the moderating role of accounting information quality on this relationship. The study uses the ordinary least squares method (OLS) to analyze data from 65 Egyptian-listed firms from 2011 to 2020. The results show a significant positive effect of investor sentiment on the stock price crash risk. Also, it is found that a decrease in the quality of accounting information enhances the positive relationship between investor sentiment and the stock price crash risk. Additional tests confirm the aforementioned results. Nevertheless, the moderating role was rejected after using the Generalized Method of Moments (GMM). The findings of this study are consistent with the theoretical basis of both the bad news hoarding and the heterogeneous beliefs theories, which assert that storing bad news during high sentiment periods increases the stock price crash risk. Therefore, improving the information environment is recommended by increasing disclosure and transparency levels and activating governance mechanisms to prevent opportunistic practices. The findings of this study provide useful information to investors, regulatory and supervisory authorities, and other stakeholders about the role of accounting information quality in reducing the activities of storing bad news and reducing investors' reliance on their sentiments and feelings.