| In recent years,the phenomenon of stocks crash occurred frequently in China’s stock market.Which not only triggered the fierce discussion of scholars,but also investor and the relevant government departments pay close attention to the problem.Numerous studies have shown that the collapse of the stock price is mainly because managers have incentives to conceal business risk and negative,firm-specific information from investors for their own interests.However,there is a limit on the amount of bad news that managers are able to absorb,and they tend to give up by releasing all accumulated bad news to the stock market at once when an abandonment level of bad news hoarding is reached.Inducing investors panic and selling shares of the company,eventually resulting in a stock price crash.The separation of ownership and control in modern corporations creates a conflict of interest between shareholders and managers.Owing to information asymmetry,lack of independence of the board of directors and the weakness of collective decision-making,the decision-making power of enterprise has flow gradually to the management especially CEO who at the top of the bureaucratization.CEO hide the true business situation in order to obtain additional revenue,and the concentration of power provide favorable conditions to CEO,it also aggravate the fluctuation of the enterprise’s operating performance.According to the theory of information asymmetry and manager power,we researched on the CEO power impacts on the crash risk of stock price in theory.At the same time,we further elaborated how the property rights and Monitoring mechanism(Board of supervisors,institutional investors and independent directors)affect this relationship and made corresponding hypotheses.Meanwhile,according to the existing research,we built CEO power metrics through four dummy variables which collected manually.The two indexes of stock price collapse risk are obtained by drawing on existing calculation model and large number of calculations.Finally,we test the hypotheses presented in this paper and draw the following conclusions:First,we provided strong evidence that CEO power is positively associated with stock price crash risk.This suggests that powerful CEO are more inclined to over-investment and high-risk investment in order to get more benefits,which exacerbated the fluctuations in business performance.Second,we proved that the positive correlation is stronger between CEO power and the risk of stock price collapse in state-owned enterprises.This suggested that the CEO power of state-owned firms has greater impact on the crash risk of stock pricethan non-state-owned firms due to "lack of owner" and the existence of political objectives.Third,the impact of CEO power on crash risk is more pronounced when the scale of board of supervisors is larger.This shows that the board of supervisors is prone to appear the phenomenon of "free-rider" when the scale is larger,it is difficult to reach consensus and increase business operating costs,which is more detrimental to its role in the supervision of CEO.Fourth,the impact of CEO power on crash risk is more pronounced when institutional ownership is higher.This confirms the hypothesis of "strategic collusion",indicating that China’s institutional investors did not play its role in the supervision,but further provide a favorable condition for CEO,and increasing the risk of corporate share price collapse.Fifth,the impact of CEO power on crash risk is weaker when the proportion of independent directors is higher,but the influence is not statistically significant. |
