Do Overseas Financial Institutions Experiences of Executives Reduce Stock Price Crash Risk?

Abstract

This study examines the effect of executives’ overseas working experiences in financial institutions on stock price crash risk in Chinese stock markets. We show that overseas experiences significantly alleviate crash risk, and the effect is more pronounced in firms with weak internal control, low accounting conservatism, high large shareholders’ holding, and weak investor protection. The effect is insignificant in stated-owned enterprises and firms with strong external monitoring. Our results are robust to alternative specifications and measures. Overall, this study highlights a new channel of international knowledge spillover and provides practical implication to regulators in emerging markets for attracting overseas talents.

Keywords: Returnee Executives, Stock Price Crash Risk, Chinese Capital Market, Corporate Governance

JEL Classification: G14, G18