From alignment to crash: How CFO co-option affects stock prices

Wenqiong Liu, Chih-Chuan Yeh, Lingyu Zhang and Ho-Chuan Huang

Finance Research Letters, 2025, vol. 82, issue C

Abstract: This study examines how CFO co-option affects stock price crash risk in Chinese listed companies. Using data from 2000 to 2022, we find that co-opted CFOs significantly increase the likelihood of stock price crashes. This effect is more pronounced in firms with higher financial constraints and weaker in firms operating in more competitive markets. Excessive or high-risk investments by co-opted CFOs drive this risk. The findings underscore the importance of CFO independence in corporate governance to reduce financial instability and protect shareholder value. This research highlights the critical role of CFO co-option in firm risk and calls for stronger oversight mechanisms.

Keywords: Crash risk; CEO; CFO; Co-option (search for similar items in EconPapers)
JEL-codes: C23 G30 G34 G39 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612325008451
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325008451

DOI: 10.1016/j.frl.2025.107586

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().