Abstract
We find that firms with powerful CEOs lead to stock price crash. The effects of earnings management, tax avoidance, CFO option incentives and CEO overconfidence on crash are more pronounced for firms with powerful CEOs. The effect of CEO pay slice on crash risk is more pronounced for firms with powerful founder CEOs. The takeover index, a proxy for corporate governance, mitigates stock price crash for firms with non-powerful CEOs. Product market competition does not attenuate the impact of CEO power on crash. Our findings provide new insights on the importance of CEO power in driving stock price crash risk.
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