Scholar-type CEOs and Stock Price Crash Risk of Listed Companies

Abstract

For China’s stock market, which is in the emerging capital market, chasing the rise and killing the fall and extreme market risks occur frequently. The risk of stock price crash caused by this phenomenon has become a major obstacle to the orderly development of capital market. The managerial characteristics of scholar-type CEOs are of great significance to the management behavior of enterprises. Their management style is reflected in the decision-making behavior of enterprises, which provides a new research perspective for the risk of stock price crash. Based on the brand theory and the reputation theory, academic experience shapes executives’ higher moral quality and sense of social responsibility, and shapes their rigorous logical reasoning and analytical judgment ability; it makes them have higher reputation cost, and makes them more conservative, self-disciplined, professional and rational, and more motivated to restrain themselves when participating in management decision-making. Based on the A-share listed companies in China from 2009 to 2018, this paper empirically tests the objective performance, transmission path and influencing factors of CEO academic experience influencing stock price crash risk. From the perspective of information risk and agency risk, we find that scholar-type CEOs can significantly reduce the risk of stock price crash by reducing information risk and agency risk; further research on the influencing factors and economic consequences of stock price crash risk shows that CEO academic experience can reduce the risk of stock price crash more effectively in the case of non-state-owned enterprises, the combination of two jobs, and higher institutional investors’ shareholding ratio. This paper interprets the formation mechanism of stock price crash risk of listed companies based on the perspective of executive governance, and supports the information hiding hypothesis. From the theoretical level, the research result provides ideas for further exploring how management experience affects corporate financial behavior, and provides a new perspective and beneficial supplement for the research of high-level echelon theory and executive heterogeneity; from the practical level, it provides new evidence support for listed companies to make scientific and reasonable CEO appointment decisions and high-level talent selection, and provides practical guidance and experience reference for further exploring the impact of executive academic experience on enterprise management behavior, promoting the healthy and orderly development of the capital market, and establishing a stable multi-level capital market.