Industry Tournament Incentives and Stock Price Crash Risk

Financial Management, Forthcoming

42 Pages Posted: 2 Oct 2020

See all articles by Thomas R. Kubick

Thomas R. Kubick

University of Nebraska-Lincoln

G. Brandon Lockhart

Clemson University - Department of Finance

Date Written: June 29, 2020

Abstract

Theoretical and empirical studies argue that managerial hoarding of negative firm-specific information can result in large negative stock price corrections once the accumulated information is revealed. A managerial labor market with tournament-like progression provides managers with the incentive to withhold negative information. We find that CEOs with stronger incentives to progress in the managerial labor market tournament have significantly greater stock price crash risk, consistent with a greater propensity for these executives to withhold negative firm-specific information. The empirical patterns that we document suggest a negative externality to the positive incentive effects provided by the managerial labor market.

Keywords: CEOs, Disclosure, Executive Compensation, Tournament Incentives, Stock Price Crash Risk

JEL Classification: J33, D89, G10, M52

Suggested Citation

Kubick, Thomas R. and Lockhart, G. Brandon, Industry Tournament Incentives and Stock Price Crash Risk (June 29, 2020). Financial Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3675614 or http://dx.doi.org/10.2139/ssrn.3675614

Thomas R. Kubick

University of Nebraska-Lincoln ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

G. Brandon Lockhart (Contact Author)

Clemson University - Department of Finance ( email )

Clemson, SC 29634
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
53
Abstract Views
301
rank
462,372
PlumX Metrics