CEO Big Five Personality and Stock Price Crash Risk

52 Pages Posted: 10 Jan 2019 Last revised: 26 Mar 2019

See all articles by Ming Liu

Ming Liu

McGill University - Desautels Faculty of Management

Date Written: January 8, 2019

Abstract

This study investigates whether CEO Big Five personalities (i.e., agreeableness, conscientiousness, extraversion, neuroticism and openness) are associated with stock price crash risk. The Big Five can influence managerial behaviors to withhold or release bad news. When the amount of withheld negative information is accumulated to a threshold, the accumulated bad news come out at once and lead to crashes. We find that agreeableness and neuroticism are positively related to stock price crash risk and conscientiousness is negatively related to stock price crash risk. We then examine the effects of personalities on managerial bad news withholding, supporting the bad news hoarding channel. Moreover, we find the mitigating effects of agreeableness and neuroticism and the contributing effects of conscientiousness are more pronounced when firms have higher CEO dominance, lower litigation risk and higher financial constraints. However, higher institutional ownership is not enough to mitigate the contributing effects of conscientiousness on stock crashes.

Keywords: CEO Personality, Stock Crash Risk, Bad News Hoarding

JEL Classification: G02, G14, G30, M12, M40

Suggested Citation

Liu, Ming, CEO Big Five Personality and Stock Price Crash Risk (January 8, 2019). 2019 Canadian Academic Accounting Association (CAAA) Annual Conference. Available at SSRN: https://ssrn.com/abstract=3312426 or http://dx.doi.org/10.2139/ssrn.3312426

Ming Liu (Contact Author)

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada

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