Executive team heterogeneity, equity pledges, and stock Price crash risk: Evidence from China

Abstract

Heterogeneous characteristics of executive teams have drawn wide concern as a factor highly related to economic decisions. Using data from 2015 to 2020 among Chinese A-share listed companies, we examine the moderating role played by executive team heterogeneity in the positive impact of controlling shareholder equity pledges on stock crash risk. We find that executive team heterogeneity of overseas background and age reduce the positive impact, while tenure heterogeneity increases the positive impact. Further evidence shows that political connections, ownership property and D&O liability insurance can induce different moderating effects of executive team heterogeneity in the relationship between equity pledges and stock price crash risk. Our study also contributes to helping listed companies effectively manage stock crash risk connected with equity pledges.