원문정보
초록
영어
The literature posits that overconfident CEOs are more likely to hoard bad news, resulting in higher stock price crash risk than non-overconfident CEOs. However, what if a CEO experiences an extreme market crash of their firm’s stock price during their tenure? We provide evidence that overconfident CEOs appear to moderate their behavior after their stock price crash experience. We find that the positive effect of CEO overconfidence on a firm’s future stock price crash risk is less pronounced after a crash experience. We propose three possible reasons. First, a CEO’s crash experience, particularly the first one, reduces their confidence level. Second, firms that experience a crash tend to change their CEO, typically from an overconfident to a non-overconfident CEO. Finally, firms seek to adjust their CEO compensation structure after a crash experience. Our results similarly hold for executives in firms. Overall, we suggest that both the CEO and the firm may learn from their crash experiences.
목차
1. Introduction
2. Literature review and hypotheses development
2.1. The relationship between an overconfident CEO and stock price crash risk
2.2. The impact of CEO’s prior experiences
2.3. Channels for moderating an overconfident CEO’s behavior after the crash experience
3. Data
3.1. Stock price crash risk measures
3.2. CEO overconfidence
3.3. Sample selection
4. Empirical results
4.1. CEO overconfidence and future stock price crash risk
4.2. Possible channels: CEO confidence, CEO turnover, and CEO compensation
4.3. Executive level and governance improvement
5. Additional analysis
5.1. Robustness tests
5.2. Does the crash experience affect the relationship between CEO overconfidence and corporate investment?
6. Conclusion