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A1491
Title: CEO career horizon and stock price crashes Authors:  Andreas Petrou - Cyprus University of Technology (Cyprus)
Panayiotis Andreou - Cyprus University of Technology (Cyprus)
Christodoulos Louca - Cyprus University of Technology (Cyprus) [presenting]
Abstract: Prior studies focus on the effects of firm-level factors that relate to stock price crashes and ignore CEO characteristics. The aim is to fill this gap in the literature by providing evidence that firms managed by CEOs with longer career horizon experience more stock price crashes, including crashes caused by revelation of negative news coming from breaks in positive earnings strings. Further, this relation is heightened in the presence of managerial discretion as captured by either CEO duality or a diversified organizational structure. Overall, the findings suggest that incentives to hoard negative information arise from CEO career horizon and create agency problems that lead subsequently to stock price crashes. In addition, they raise important considerations for managerial discretion, and more broadly corporate governance system, at various stages of CEO career horizon.