CEO Age and Stock Price Crash Risk

CEO Age and Stock Price Crash Risk

We show that firms with younger CEOs are more likely to experience stock price crashes, including crashes caused by revelation of negative news in the form of breaks in strings of consecutive earnings increases. Such strings are accompanied by large increases in CEO compensation that do not dissipat...

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Veröffentlicht in:Review of Finance 2017-05, Vol.21 (3), p.1287-1325
Hauptverfasser: Andreou, Panayiotis C., Louca, Christodoulos, Petrou, Andreas P.
Format: Artikel
Sprache:eng
Schlagworte:
Age
Chief executive officers
Executive compensation
Stock prices
Studies
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Beschreibung
Zusammenfassung:We show that firms with younger CEOs are more likely to experience stock price crashes, including crashes caused by revelation of negative news in the form of breaks in strings of consecutive earnings increases. Such strings are accompanied by large increases in CEO compensation that do not dissipate with crashes. These findings suggest that CEOs have financial incentives to hoard bad news earlier in their career, which increases future crashes. This negative impact of CEO age effect is strongest in the presence of managerial discretion. Overall, the findings highlight the importance of CEO age for firm policies and outcomes.
ISSN:1572-3097
1875-824X
DOI:10.1093/rof/rfw056