Study On The Relationship Of Managerial Entrenchment And Stock Price Crash Risk

In the stock market,stock price crash not only cause extensive damage to investors' interests,but also influences the healthy and steady development of capital market.In current literatures,many researches have been done on the cause of stock price crash risk from various angels,such as system background,corporation governance and market environment.Being responsible to corporation governance,managers play an important role in the company daily management.Under internal and external control,managers' behaviors to ensure the security of their posts and to seek individual interests are defined as “managerial entrenchment”.From managerial entrenchment motive,managers' selectively concealment of internal bad news could lead to stock price crash risk.From the aspect of individual stock price crash,this thesis analysis the relationship between managerial entrenchment and stock price crash risk.The thesis reviews the related literature about managerial entrenchment and stock price crash risk.Based on hypothesis of rational man,principal-agent theory,asymmetric information theory and upper echelons theory,analytical framework of managerial entrenchment and stock price crash risk is proposed.Then,this thesis take listed companies from Shanghai and Shenzhen A-shared stock market from 2011-2015 as a sample,and pick 7 indicators from three aspects of managers' characteristics,managers' incentives and managers' supervision.Then the thesis does some empirical analysis of relationships between managerial entrenchment and stock price crash risk,by descriptive analysis,multiple liner regression analysis and logistic regression analysis.The results show that,managers' share holdings and duality of CEO and chairman are positively related to stock price crash risk,managers' age,managers' education,managers' pay,and proportion of independent directors are negatively related to stock price crash risk.Further studies show that the relationship between managerial entrenchment and stock price crash risk in state-owned enterprises is stronger than that in private companies.The thesis also construct managerial entrenchment level index by CRITIC method,then verified the positive relation between managerial entrenchment level index and stock price crash risk.Finally,based on the above conclusions,we propose the suggestions of reducing stock price crash risk by preventing and controlling managerial entrenchment behaviors.Specifically,we suggest building a managerial entrenchment level evaluation system,using more salary incentives instead of stock option incentive,and reinforcing external constraints and so on.The thesis analyses the relationship between managerial entrenchment and stock price crash risk.The study enriches the managerial entrenchment theory and also enriches the research between managerial entrenchment and stock price crash risk.The thesis also provides empirical evidences of preventing and controlling managerial entrenchment behaviors,restraining stock price crash risk to public companies.