The Tenure Of CEO And Stock Price Crash Risk

The global financial crisis breaked out in 2008,thousands of shares droped to limit in one day,thousands of shares climbed to limit in one day,thousands of shares droped while suddenly then climbed to limit and shares trigged the circuit breaker from 2015.All these phenomena discrupted regular operation of the capital market seriously,brought huge panic to the investors and destroyed the stability of financial system of the whole country.The stock price crash arouse widespread attention of investment community,the relevant national policy making department and the academic community.However,till now,the research on stock price crash risk is mainly focused on the internal and external characteristics of companies.The research about stock price crash risk explored from the perspective of managers' characteristics are rare,which haven't daggered collapse mechanism of managers' characteristics.Based on the theories such as principal agency,information asymmetry and upper echelons,this article select relevant data about listed companies in A-Share in China from 2008 to 2015 in database of CSMAR to explore whether there is significant difference in the stock price crash at the different stages of CEO's tenure,and digger out the way of CEO's tenure affects stock price crash.So we input earnings management,accounting conservatism and inefficient investment to analysis if they serve intermediary between the tenure of CEO and stock price crash risk.In addition,We also input internal control information disclosure to explore whether it is a governance mechanism for CEO's tenure to stock price crash.According to the result of the paper,there are four findings:(1)The tenure of CEO has a U-shape relationship with stock price crash risk.With the extension of CEO's tenure,stock price crash risk decreases gradually,but it would rise when CEO is about to leave.(2)In the U-shape relationship between the tenure of CEO and stock price crash risk,accounting conservation playes a full mediating effect,and inefficient investment playes mediating effect in part,while earnings management hasn't played mediating effect.(3)Efficient internal control can reduce the company's stock price crash risk effectively and ease the U-shape relationship between the tenure of CEO and stock price crash risk.(4)Compared to the state-owned enterprises,the U-shape relationship between the tenure of CEO and stock price crash risk is more stronger in non state-owned enterprises.The main contributions of this paper are as follows:(1)This paper enrichs the relevant literature on the crash effect of CEOs' tenure,the mechanism of action and the specific path of accounting conservatism and inefficient investment,and the governance effect of internal control.(2)This paper will help strength governance and supervision from the tenure of CEO,accounting conservatism and inefficient investment by the board of directors,board of supervisors,shareholders' meeting of listed companies and securities regulatory department to stabilize capital market order.(3)This paper can promote improving the internal control system by policy-making departments,such as Ministry of Finance,to reduce the risk of operation of capital market.