Research On The Relationship Between The Tmt's Background Characteristics And Stock Price Crash Risk

The financial crisis that broke out in 2008,the limit up and down phenomena of thousands of stocks in the stock market since 2015 proved that the phenomena of stock price crash risk in the stock market has frequently occurred recently in China,which not only hinders the smooth operation of capital market,but puts the company into a severe external financial environment,on the other hand,brings the huge panic to the investors,leading a vicious circle.Therefore,the study of stock price crash risk is widely concerned in the academic field,as well as by the relevant government departments and stock investors.According to the previous literature reviews,most scholars analyzed the influence of the background characteristics of managers and the internal and external factors of company on the risk of stock price in the aspect of personal characteristics of managers and the internal and external characteristics of the company.Concerning on personal characteristics of managers,the features of personal background(such as gender of CEO,confidence abuse of CEO,regional belief of managers and so on)has been researched as factors of impact on stock price crash risk.However,based on Upper Echelons Theory,the research of background feature of the whole team members of top managers seems less.After arrangement and summary of previous research,we qualitatively analyze the relationship between the relevant background features of top management team and stock price crash risk,and then propose our research hypothesis based on information asymmetry,Upper Echelons Theory and principalagent theory.In the text step,we adopt the relevant data of A-shares listed firms in China in 2005-2014 years as initial samples,filter the data and define the variables relying on previous research.In the demonstration and analysis,the methods such as descriptive statistics,correlation analysis and multiple regression analysis have been applied to demonstrate the relationship between the relevant background features of top management team and stock price crash risk.Moreover,we try to figure out if the interdependency and robustness of both is changeable in the firms owning different property rights in this paper.Moreover,considering the probability of endogeneity between the background characteristics of TMT and stock price crash risk,we conduct the endogeneity detection.However,the result shows there exists no such relationship between them,therefore,the regression result is quite believable.Finally,based on the result of research,we propose some approaches for building a reasonable management team in the listed companies to reduce the possibility of the stock price crash risk of company,and eventually promote the steady operation of the capital marketThe empirical results showed that:(1)there is a significant correlation between the background characteristics of top management team and the stock price crash risk,the average age,the proportion of female executives,for example,the average tenure and the heterogeneity of age are significantly negatively related to the stock prick crash risk,but the heterogeneity of tenure is significantly positively related to the stock price crash risk;(2)Compared with state-owned enterprises,the correlation between background of the top management team and the stock price crash risk is more significant in the private firms.The research result above demonstrate that there is exactly significant correlation between the background characteristics of top management team and the stock price crash risk.Due to the difference of agency costs,risk aversion and transparency of TMT owning different background feature,the choice of investment projects of companies and informational uncertainty between companies and investors will be affected.When the top managers prefer to invest the projects of low risk or sharing positive net present value,which will decline the probability of stock price crash risk.On the other hand,the descent of informational uncertainty between companies and investors will lead an accurate estimate of companies operations,thus reducing the probability of stock price crash risk.Based on the research and conclusions,we hope to provide the valuable suggestions for the listed companies when building their top management teams in the various aspects,such as age,tenure,the heterogeneity of them and gender.Specifically,more female managers can be employed and they can raise the average age,enhance the pluralism of age and synchronism of tenure of TMT to improve the risk aversion of team,reduce agency cost and the information asymmetry between the shareholders and the company executives,and to decline the conflict of team,which contribute to more projects sharing positive net present value invested,thereby reducing the stock price crash risk of companies to some extent.The main contributions of this article are as follows:(1)Enrich the research of factors impacting on stock price crash risk by exploiting the relationship between background of the top management team and the stock price crash risk in the aspect of background of the top management team based on high-level theory.(2)Enrich the academic research of the nature of property right.This paper analyzes whether there exists difference in the list companies sharing different property right when exploring the correlation between background of the top management team and the stock price crash risk.We discover that compared with state-owned enterprises,the correlation between background of the top management team and the stock price crash risk is more significant in the private firms,which makes the research scientific and profound.(3)The conclusion of this paper contributes to providing suggestions for listed companies when building appropriate TMTs in the aspect of reducing the stock price crash risk.