Fang, Xiaohua and Girardone, Claudia and Li, Yiwei and Zeng, Yeqin (2024) Generalist CEOs and stock price crash risk. Journal of Business Finance & Accounting. DOI https://doi.org/10.1111/jbfa.12804
Fang, Xiaohua and Girardone, Claudia and Li, Yiwei and Zeng, Yeqin (2024) Generalist CEOs and stock price crash risk. Journal of Business Finance & Accounting. DOI https://doi.org/10.1111/jbfa.12804
Fang, Xiaohua and Girardone, Claudia and Li, Yiwei and Zeng, Yeqin (2024) Generalist CEOs and stock price crash risk. Journal of Business Finance & Accounting. DOI https://doi.org/10.1111/jbfa.12804
Abstract
We investigate whether generalist chief executive officers (CEOs), that is, CEOs who gain transferable skills across firms and industries, have less incentive to hoard bad news. To address endogeneity concerns stemming from firm–CEO matching, we deploy a difference-in-differences method utilizing exogenous CEO turnovers, propensity score matching and entropy balancing matching methods, and Oster's coefficient stability test. Supporting our conjecture, we find a negative relation between CEOs’ general ability index (GAI) and future stock price crash risk. The effect of CEOs’ GAI on crash risk is stronger when labor demand is stronger and when firms have more agency conflicts. Our analysis further suggests that generalist CEOs attenuate crash risk by increasing conditional accounting conservatism and reducing real earnings management. Taken together, our findings highlight the role of CEOs’ general human capital in increasing their tolerance for failure and mitigating the agency problem.
Item Type: | Article |
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Uncontrolled Keywords: | bad news hoarding; career concerns; chief executive officers; crash risk; general managerial skills; tolerance for failure |
Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Essex Business School |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 19 Jul 2024 09:52 |
Last Modified: | 30 Oct 2024 16:54 |
URI: | http://repository.essex.ac.uk/id/eprint/38350 |
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Filename: Business Fin Account - 2024 - Fang - Generalist CEOs and stock price crash risk.pdf
Licence: Creative Commons: Attribution 4.0