Powerful CEOs and Stock Price Crash Risk

Name: Powerful CEOs and Stock Price Crash Risk
Creator: M. Al Mamun
Keywords: 0502 economics and business, 05 social sciences, 8. Economic growth

M. Al Mamun

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SSRN Electronic Journal

Article . 2016 . Peer-reviewed

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https://dx.doi.org/10.2139/ssr...

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Powerful CEOs and Stock Price Crash Risk

descriptionPublicationkeyboard_double_arrow_right Article , Other literature type 01 Jan 2016 English Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

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Authors: M. Al Mamun;

doi: 10.2139/ssrn.2797107

Powerful CEOs and Stock Price Crash Risk

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Abstract

We find that firms with powerful CEOs lead to stock price crash. The effects of earnings management, tax avoidance, CFO option incentives and CEO overconfidence on crash are more pronounced for firms with powerful CEOs. The effect of CEO pay slice on crash risk is more pronounced for firms with powerful founder CEOs. The takeover index, a proxy for corporate governance, mitigates stock price crash for firms with non-powerful CEOs. Product market competition does not attenuate the impact of CEO power on crash. Our findings provide new insights on the importance of CEO power in driving stock price crash risk.

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