Married CEOs and stock price crash risk

Abstract

This study examines whether marriage, as a social construct and cultural norm, can affect firm‐level stock price crash risk. We find that firms managed by married CEOs are associated with lower future stock price crash risk, after controlling for a set of firm characteristics and CEO traits. We document that CEO marriage reduces crash risk by curbing bad news hoarding and formation activities. Moreover, the attenuating impact of CEO marriage on crash risk is more pronounced among firms with weaker corporate governance and those run by less prominent, higher‐delta and lower‐paid CEOs.

Is Marriage a Turning Point? Evidence from Cash Holdings Behaviour

“…Owing to the lack of a systematic and comprehensive dataset on CEO marital status, in the prior literature Roussanov and Savor (2014) collected data on the marriage status of CEOs of US firms manually from various sources. 6 Despite some limitations-lack of time variation of marriage, no information on marriage and divorce date and on marriage quality, and undisclosed marriage-like relationships- Roussanov and Savor (2014) argue that their approach fairly represents CEO marital status and continues to be used in recent literature (Hilary et al, 2017;Hegde and Mishra, 2019;Kim, Liao and Liu, 2022). We draw 28,023 firm-year observations from Roussanov and Savor's (2014) database covering 1992-2008.…”

“…A burgeoning literature also shows that single-CEO firms display more severe agency problems, reflected in a higher level of earnings management(Hilary et al, 2017), a higher propensity to withhold bad news vis-à-vis higher crash risk(Kim et al, 2022), and higher levels of insider trading and trading returns(Hedge et al, 2022).…”

The dark side of executives' professional background: Evidence from Chinese firm's stock price crash risk

“…Studies have found that executives with higher hometown reputations (Gu et al, 2022), disaster experience (Chen et al, 2021), younger age (Andreou et al, 2017), higher status, and greater power (Jiang et al, 2018;Mamun et al, 2020) help to deter their inclination to hide bad news and improve corporate information transparency to reduce the risk of corporate stock price crashes. Compared to unmarried executives, married executives have a lower appetite for risk and helps reduce the risk of stock price crashes (Kim et al, 2021). However, overconfident CEOs are usually more likely to adopt negative net present value or high-risk projects, increasing the likelihood that the firm falls into financial distress, and will instinctively issue optimistic forecasts that prevent bad news from entering the market (Zeng et al, 2017).…”

A Machine Learning Approach for Investigating the Determinants of Stock Price Crash Risk: Exploiting Firm and CEO Characteristics

“…Previous studies have also identified CEO characteristics as key factors influencing firm-specific stock price crash risk [10][11][12][13]. For example, a younger CEO early in his career has the incentive to defer bad news for a string of consecutive earnings, increasing the likelihood of a crash risk [10].…”