Do external labour market incentives constrain bad news hoarding? The CEO's industry tournament and crash risk reduction

Hasibul Chowdhury, Allan Hodgson and Shams Pathan

Journal of Corporate Finance, 2020, vol. 65, issue C

Abstract: We find that a CEO's industry tournament incentives (CITI) induce a CEO to undertake strategies that reduce the propensity of a firm to incur future stock price crash risk. CITI also has a mitigating effect on accounting techniques (such as, accrual manipulation, real earnings management, and financial restatement) used as channels for obfuscation and, therefore, is associated with a lower tendency to withhold bad news. CITI is more effective in reducing crash risk propensity when there is lower information quality and weaker external monitoring. Results are robust to firm governance controls, gender monitoring, and the specific personal attributes of CEOs. In short, CITI imposes on CEOs an incentive to brand themselves according to sustained visibility concepts.

Keywords: Industry tournament incentives; Crash risk; Bad news hoarding; Non-competition agreement (search for similar items in EconPapers)
JEL-codes: G12 G32 G34 M52 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:65:y:2020:i:c:s0929119920302182

DOI: 10.1016/j.jcorpfin.2020.101774

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