Nonlinear effect of CEO tenure on stock price crash risk

Nikeel Nishkar Kumar and Rajesh Mohnot

Finance Research Letters, 2024, vol. 68, issue C

Abstract: This study investigates the nonlinear relationship between CEO tenure and stock price crash risk. Using data from publicly listed U.S. firms over the period from 2000 – 2022, we report an inverted U-shaped association between CEO tenure and stock price crash risk. Specifically, managers in their early tenure appear to hoard bad news up to a threshold. After this threshold, managers appear to engage in less bad news-hoarding behavior. The threshold value of CEO tenure is attenuated by director stock ownership and lower litigation risk. The results underscore the need for monitoring early career CEOs given the nonlinear association.

Keywords: Ceo tenure; Director stock ownership; Litigation risk; Nonlinearity; tail risk (search for similar items in EconPapers)
JEL-codes: G34 M52 M55 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:68:y:2024:i:c:s1544612324009991

DOI: 10.1016/j.frl.2024.105969

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