Exploring the Link between Corporate Governance Mechanism and Stock Price Crash Risk Under the Complementary Role of IFRS Adoption in Pakistan

Purpose: This research aims to explore the link between corporate governance mechanism and stock price crash risk under the complementary role of IFRS adoption in Pakistan.Design/methodology/approach: Data has been extracted from the financial statements of 155 non-financial firms listed in PSX from 2007 to 2019 for the panel data analysis. An index for corporate governance mechanisms has been developed through PCA. IFRS is a dummy variable. Crash risk has been measured by down-to-up volatility (DUVOL) and negative skewness (NSKWN) of firms’ stock prices. This study applies the fixed effect-RSE (Driscoll and Kraay, 1998) regression technique to obtain the results for hypothesis testing.Findings: This research explores a significant negative link between corporate governance mechanism and stock price crash risk under the complementary role of IFRS adoption in Pakistan. Originality/value: To the best of the author’s knowledge, this is the first study that provides empirical evidence to the research literature by exploring a negative link between corporate governance mechanism and stock price crash risk under the complementary role of IFRS adoption in a developing country-Pakistan