Research On The Impact Of CEO Overconfidence On Firm-level Stock Price Crash Risk

Firm-level Stock price crash means that the company's stock price suddenly dropped substantially without any warning,triggering a market panic,increasing difficulties which government and market regulation may face.This crash will affect the sustainable and healthy development of the company seriously,bring huge losses to investors,lower people's well-being and influence stability of social order.As the company's managers,executives have mastered most resources of the enterprise,making investment and financing decisions,intervening outside information,coordinating social relationships with stakeholders.Therefore,the professional qualities and personalities of executives are affecting the whole company's economic consequences.By giving greater power,most executives have an obvious tendency to act over-confidently,invest excessively,hidden information which resulting in the accumulation of negative information.Once the accumulated information leaks,investors will undersell their stocks.As a result,the stock price tumbled.From the perspective of behavioral finance,this paper studied the relationship between the executives' overconfidence and the crash risk of individual stock price,and further analyzed moderating effect of the accounting conservatism and market condition.By collecting data of Shanghai and Shenzhen A-share listed companies from 2011 to 2015,through descriptive statistics,correlation analysis,and regression analysis,we found that:first,the executives' overconfidence significantly increased the crash risk of individual stock price.Second,the higher the accounting conservatism is,the positive correlation between CEO overconfidence and the crash risk of individual stock price is lower;Third,in "bull market",the positive relationship is stronger than the one in a "bear market".These conclusions provide a new angle of studying the rising of stock price crash risk,not only helping the company attaches great importance to the management team's overall qualities and overconfidence,timely adjust the management structure.but also having some practical guiding significance to the prevention and management of the real market stability.