Accounting determinants of systematic risk: Dynamic association among firm's financial risk,operating risk and systematic risk

The release of China's New Accounting Standard has strongly promoted the improvement of financial information disclosure system.However,up to now,the researchers have not clarified the relationship between accounting information and stock market risk of listed companies.In this paper,one new economic model was put forward to study the dynamic relationship between financial risk,operating risk,and systematic risk.The main findings are: the degree of operating leverage and the degree of financial leverage magnify the systematic risk of the firm,which still holds under the time-varied condition;the systematic risk of the unlevered firm arises from the changes in the ratio of net profit to market value of common equity,the sales growth rate,and the average price growth rate;there is a trade-off between the operating leverage and financial leverage,for example,a firm with a higher operating risk will choose one lower financial risk to get a reasonable systematic risk.Therefore,the improvement in the accounting risk disclosure system will provide more and better information about firm risks for the investors.