Research Article 5
Journal of Finance & Economics Research - Volume 11, Issue 1 2026
By Dr. Anum Durrani

The paper examines the relationship between investor sentiment, audit committee characteristics, and stock price crash risk using a sample of non-financial companies listed on the KSE-100 Index from 2010 to 2025. Stock price crash risk is measured using negative conditional skewness (NCSKEW) and down-to-up volatility (DUVOL), while investor sentiment is represented by the price-earnings ratio, overnight returns, turnover rate, dividend premium, and closed-end fund discount. Audit committee effectiveness is assessed through independence, financial expertise, meeting frequency, committee size, and gender diversity. Using panel regression analysis, the study incorporates firm-level control variables, including blockholders, return on assets, financial leverage, and firm size. The findings indicate that stock price crash risk increases with higher levels of investor sentiment. Effective corporate governance, however, reduces the adverse effects of sentiment-driven market behavior. Strong audit committees are associated with lower stock price crash risk and significantly weaken the positive relationship between investor sentiment and crash risk. The findings have important implications for investors, regulators, and policymakers in emerging markets. They highlight the critical role of audit committees in strengthening corporate transparency, improving monitoring mechanisms, reducing sentiment-driven market risks, and promoting greater financial market stability.

Submission Date: 20 Apr, 2026 Reviews Completed: 29 May, 2026
Acceptance Date: 19 Jun, 2026 Publication Date: 30 Jun, 2026