Keep calm and carry on: Do emotionally stable executives reduce stock price crash risk?

Jintong Guo, Xiyun Cheng, Ziyi Zhang and Rui Ding

Finance Research Letters, 2024, vol. 70, issue C

Abstract: This paper investigates the effect of executives’ emotional stability on stock price crash risk. Using Chinese IPO roadshow videos and machine learning techniques, we introduce a novel measure of emotional stability and find that firms led by emotionally stable executives have lower crash risk. Furthermore, we show that the effect is driven by stability of negative emotions, the effect is stronger when executives are under greater pressure, and emotionally stable executives refrain from bad news hoarding by using less positive tone in annual reports. Overall, we extend the literature on the determinants of crash risk from a psychological trait perspective.

Keywords: Emotional stability; Stock price crash risk; Machine learning; IPO roadshow video (search for similar items in EconPapers)
JEL-codes: G32 G41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:70:y:2024:i:c:s1544612324013059

DOI: 10.1016/j.frl.2024.106276

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