Abstract
This study investigates whether CEO Big Five personalities (i.e., agreeableness, conscientiousness, extraversion, neuroticism and openness) are associated with stock price crash risk. The Big Five can influence managerial behaviors to withhold or release bad news. When the amount of withheld negative information is accumulated to a threshold, the accumulated bad news come out at once and lead to crashes. We find that agreeableness and neuroticism are positively related to stock price crash risk and conscientiousness is negatively related to stock price crash risk. We then examine the effects of personalities on managerial bad news withholding, supporting the bad news hoarding channel. Moreover, we find the mitigating effects of agreeableness and neuroticism and the contributing effects of conscientiousness are more pronounced when firms have higher CEO dominance, lower litigation risk and higher financial constraints. However, higher institutional ownership is not enough to mitigate the contributing effects of conscientiousness on stock crashes.
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