Overworked gatekeepers: auditor busyness and stock price crash risk

Purpose While previous research has enriched the understanding of the economic consequences of auditor characteristics, but little research has explored the relationship between the characteristic of auditor busyness and capital markets. This paper aims to examine the impact of auditor busyness on stock price crash risk. Design/methodology/approach This paper collects data on auditor busyness from 2012 to 2023 and examines the impact of the behavioral characteristics of auditor busyness on stock price crash risk. Hypotheses are tested using a baseline ordinary least squares regression model. Findings Research findings indicate a significant positive correlation between auditor busyness and stock price crash risk. Mechanism analysis reveals that auditor busyness expands management’s scope for earnings manipulation and ultimately elevating stock price crash risk. Further analysis indicates that when firms have more effective internal controls and audit committee operations, and when auditors possess stronger industry expertise, the positive relationship between auditor busyness and stock price crash risk is significantly weakened. In contrast, this positive relationship becomes more pronounced in firms with highly concentrated ownership, distracted institutional investors and audits conducted by Big4 audit firms. Originality/value Overall, this study enriches the literature examines the relationship between auditor busyness and stock price crash risk, while providing evidence for understanding the impact of auditor behavior on capital market stability.