Executive Team Heterogeneity and Information Suppression: Evidence from Stock Price Crash Risk

Posted: 6 Mar 2023 Last revised: 26 Apr 2023

See all articles by Xiaohua Fang

Xiaohua Fang

Florida Atlantic University

Yiwei Li

University of Essex, EBS

Jeffrey Pittman

Memorial University ; Virginia Tech

Yeqin Zeng

Durham University Business School, Finance and Economics

Date Written: February 1, 2023

Abstract

We examine whether the equity incentive heterogeneity of the executive team engenders a positive externality by curtailing stock price crash risk. Supporting this prediction, we find a negative relation between the equity incentive heterogeneity of the executive team and stock price crash risk. Our strong, robust evidence implies that this equity incentive heterogeneity plays a major internal governance role in preempting corporate bad news hoarding activities. In additional analysis, we show that the impact of equity incentive heterogeneity on crash risk is stronger for firms experiencing severe agency conflicts and poor governance. Collectively, our results lend empirical support for the importance of developing a heterogeneous equity incentive structure to deter corporate misbehavior, which, in turn, constrains stock price crash risk.

Keywords: executive team, equity incentive heterogeneity, crash risk

JEL Classification: D22, D82, G12, G32, G34, G38, J31, J33, M52

Suggested Citation

Fang, Xiaohua and Li, Yiwei and Pittman, Jeffrey A. and Zeng, Yeqin, Executive Team Heterogeneity and Information Suppression: Evidence from Stock Price Crash Risk (February 1, 2023). Available at SSRN: https://ssrn.com/abstract=4375144

Xiaohua Fang (Contact Author)

Florida Atlantic University ( email )

United States

Yiwei Li

University of Essex, EBS ( email )

University of Essex Wivenhoe Park
Essex business school
Colchester, CO4 3SQ
United Kingdom

Jeffrey A. Pittman

Memorial University ( email )

St. John's, Newfoundland A1B 3X5
Canada
709-737-3100 (Phone)
709-737-7680 (Fax)

Virginia Tech ( email )

United States

Yeqin Zeng

Durham University Business School, Finance and Economics ( email )

Office 162 Durham University Business School
Mill Hill Lane
Durham, DH1 3LB
United Kingdom

HOME PAGE: http://https://sites.google.com/site/yeqinzenghomepage/

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

Paper statistics

Abstract Views
489
PlumX Metrics