External labour market competitions and stock price crash risk: evidence from exposures to competitor CEOs’ award-winning events

Leye Li, Louise Yi Lu*, Dongyue Wang

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    1 Citation (Scopus)

    Abstract

    This study examines whether chief executive officers’ (CEOs’) external labour market competitions affect their firms’ stock price crash risks. Using CEOs’ exposure to the prestigious media-award-winning events of competitor CEOs, we document a significant increase in stock crash risk for firms with award-exposed CEOs, compared with firms without such CEOs, and this treatment effect is attenuated by strong external monitoring and a high-quality information environment, yet exacerbated by CEOs’ similarity with award winners and likelihood of winning the award. We further find that withholding bad news, risk taking and financial misreporting are the possible channels through which competitor CEOs’ award events affect stock price crash risk. Our study sheds new light on the formerly under-researched adverse effects of CEO awards by suggesting that external labour market competition associated with CEO awards plays an important role in influencing extreme downside risk in the equity market.

    Original languageEnglish
    Pages (from-to)1421-1460
    Number of pages40
    JournalAccounting and Finance
    Volume62
    Issue numberS1
    DOIs
    Publication statusPublished - Apr 2022

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