Aftershock: CEO Great Famine Experience and Stock Price Crash Risk

Cheng, Fang Chin; Ruan, Wen‐Juan; Huang, Guoliang; Zhang, Liangliang

doi:10.3389/fpsyg.2021.816034

Cited by 2 publications

(4 citation statements)

References 51 publications

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“…The average (median) of NCSKEW i,t + 1 and DUVOL i,t + 1 are -0.321 (-0.273) and -0.212 (-0.215), respectively. This is similar to the findings of Cheng et al (2021). The average value of INGAP i,t is 6.804, indicating that core managers compensation is 6.804 times that of non-core managers.…”

Section: Descriptive Statisticssupporting

confidence: 87%

“…Considering the availability of data, this study selects A-share listed companies in Shanghai Stock Exchange and Shenzhen Stock Exchange from 2010 to 2020 as initial samples. According to Cheng et al (2021) and Xu et al (2014), we filtered out the preliminary sample according to the following criteria. (1) ST or PT type listed enterprises were excluded.…”

Section: Sample Selectionmentioning

confidence: 99%

“…Referring to Kim et al (2011) and Cheng et al (2021), we use the following methods to measure the risk of stock price crash of listed companies. We first estimate firm-specific weekly returns, denoted W, as the natural log of one plus the residual return from the expanded market model regression for each firm and year:…”

Section: Risk Of Stock Price Crashmentioning

confidence: 99%

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The executive pay gap and stock price crash risk: Promotion or suppression?

Liu

Pan

2023

Front. Psychol.

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BackgroundIn recent years, cases of stock price crash have continued to emerge. However, yet little research to date has investigated the compensation incentives of top management team (TMT) affect the risk of stock price crash. Nor has research considered the impact of the executive pay gap on the stock price crash risk. Especially, as the “egalitarianism” was broken in the compensation system, and the increase of the degree of marketization of salaries, the executive pay gap has shown an expanding trend. Under this circumstance, we would systematically examine the association between the extent of executive pay gap and its future stock price crash risk.Design, methodology, and approachBased on the sample of A-Share non-financial listed companies in Shanghai and Shenzhen Stock Exchange, we used firm FE regression method to empirically examine the relationship of the internal and external compensation gaps of executives and crash risk, as well as its contigency variables and inner mechanism.FindingsThe empirical results show that there is a U-shaped relationship between the internal and external pay gap of executives and future crash risk. After passing the endogenous test and the robustness test, the conclusion still holds. Further research shows that the U-shaped relationship between the pay gap and crash risk is more pronounced, when firms are affiliated with the non-state-owned enterprise or its compensation fairness is lower. Finally, the quality of information disclosure plays a mediation effect when executive pay gap affects stock price crash risk.Originality and valueAccording to the economic and behavior perspectives, we explored the impact of compensation structure on stock price crash risk from the pay gap of executives for the first time, and extended the emerging literature of forecasting future stock price crash risk and executive pay gap. In addition, a key implication of our findings is that more guidance for firms is provided to design the compensation structures and to reduce stock price crash risk.

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Section: Descriptive Statisticssupporting

confidence: 87%

Section: Sample Selectionmentioning

confidence: 99%

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The executive pay gap and stock price crash risk: Promotion or suppression?

Liu

Pan

2023

Front. Psychol.

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“…The findings are consistent with CEOs who experienced early-life disasters being more risk tolerant, and thus more willing to accept the risks associated with bad news 10.3389/fpsyg.2022.971101 hoarding, engendering the formation of stock price crashes. Cheng et al (2021) found that CEOs who experienced the Great Famine during early life tend to hoard bad news, which results in higher stock price crash risks. The more severe and prolonged the Great Famine that the CEOs experienced, the greater the effect of this traumatic experience.…”

Section: Stock Price Crash Riskmentioning

confidence: 99%

Formative experience and stock price crash risk: Evidence from China’s “Down to the Countryside” movement

Zhang

Shi

2022

Front. Psychol.

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This study explores the influence of chairpersons’ early life experiences during the “Down to the Countryside” movement—a unique social phenomenon in China—on company stock price crash risk. This study uses 2007–2018 data from China’s A-share listed companies and a multiple regression analysis model to assess the influence of chairpersons’ Down to the Countryside experiences on the stock price crash risk of their corresponding companies. The empirical results demonstrate that chairpersons’ “sent-down” experiences shaped their risk-aversion management style, reducing companies’ risk-taking capacity. Consequently, this formative experience reduces stock price crash risks and increases company value. Heterogeneity tests on companies with different property rights reveal that chairpersons’ sent-down experiences are more pronounced in non-state-owned companies, as against state-owned companies. To alleviate endogeneity issues (e.g., self-selection bias and omitted variables) various endogeneity controls (e.g., propensity score matching, placebo tests, and difference-in-differences (DID) tests) were conducted. The results also persisted in a series of robustness checks. This study provides a new perspective on the relationship between chairpersons’ early life experiences and stock price crash risks. The empirical evidence has implications for the recruitment, incentivization, and supervision of chairpersons.

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Aftershock: CEO Great Famine Experience and Stock Price Crash Risk

Cited by 2 publications

References 51 publications

The executive pay gap and stock price crash risk: Promotion or suppression?

The executive pay gap and stock price crash risk: Promotion or suppression?

Formative experience and stock price crash risk: Evidence from China’s “Down to the Countryside” movement

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