Is conservatism good news? The case of stocks of Jakarta Islamic index.

This study examines the role of Sharia stocks to affect the association between conservatism and crash risk. Sharia stocks are represented by the Jakarta Islamic Index (JII) stocks. We use Sharia stocks as a moderating variable to provide contextual issues in discussing conservatism and crash risk. Our findings show that conservatism reduces the crash risk for Sharia stocks. The test also suggests that conservatism cannot affect crash risk for non-Sharia stocks. The examinations are also consistent with the belief that Sharia, as a set of religious norms, helps minimize future risk. This paper contributes to the literature on religion and corporate behaviors by adding a contextual factor, Sharia stocks in Indonesia.