CEO Age and Stock Price Crash Risk

Andreou, P.; Christodoulos, L.; Andreas, P.P.

doi:10.1093/rof/rfw056

CEO Age and Stock Price Crash Risk

Andreou, P.; Christodoulos, L.; Andreas, P.P.

Authors

Professor Panayiotis Andreou panayiotis.andreou@durham.ac.uk
Professor

L. Christodoulos

P.P. Andreas

Abstract

We show that firms with younger CEOs are more likely to experience stock price crashes, including crashes caused by revelation of negative news in the form of breaks in strings of consecutive earnings increases. Such strings are accompanied by large increases in CEO compensation that do not dissipate with crashes. These findings suggest that CEOs have financial incentives to hoard bad news earlier in their career, which increases future crashes. This negative impact of CEO age effect is strongest in the presence of managerial discretion. Overall, the findings highlight the importance of CEO age for firm policies and outcomes.

Citation

Andreou, P., Christodoulos, L., & Andreas, P. (2017). CEO Age and Stock Price Crash Risk. Review of Finance, 21(3), 1287-1325. https://doi.org/10.1093/rof/rfw056

Journal Article Type	Article
Acceptance Date	Sep 6, 2016
Online Publication Date	Oct 24, 2016
Publication Date	May 1, 2017
Deposit Date	Mar 30, 2017
Publicly Available Date	Oct 24, 2018
Journal	Review of Finance
Print ISSN	1572-3097
Electronic ISSN	1573-692X
Publisher	Oxford University Press
Peer Reviewed	Peer Reviewed
Volume	21
Issue	3
Pages	1287-1325
DOI	https://doi.org/10.1093/rof/rfw056
Public URL	https://durham-repository.worktribe.com/output/1389941

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Copyright Statement
This is a pre-copyedited, author-produced version of an article accepted for publication in Review Of Finance following peer review. The version of record Andreou, P., Christodoulos, L. & Andreas, P. P. (2017). CEO Age and Stock Price Crash Risk. Review of Finance 21(3): 1287-1325 is available online at: https://doi.org/10.1093/rof/rfw056.