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Home Sweet Home: Do Local CEOs Curb Stock Price Crash Risk?

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  • Chen, Jing
  • Zhao, Deqiang
  • Liu, Xinghe
  • Xu, Cheng
  • Liu, Luyao

Abstract

Motivated by understanding of the under-studied issue of how non-cultural informal institutions influence stock price, our study examines whether CEOs working in their birthplaces reduce stock price crash risk in comparison with non-local CEOs. Our results based on a sample of Chinese listed firms during the period 2007-2019 show that local CEOs significantly lower firms’ stock price crash risk. Further analyses reveal that both clan culture and social trust strengthen the focal relationship. The study advances research on the role of non-cultural informal institutions in influencing stock price crash risk and offers valuable insights for both directors and investors.

Suggested Citation

  • Chen, Jing & Zhao, Deqiang & Liu, Xinghe & Xu, Cheng & Liu, Luyao, 2022. "Home Sweet Home: Do Local CEOs Curb Stock Price Crash Risk?," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004937
    DOI: 10.1016/j.frl.2022.103314
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    References listed on IDEAS

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    Cited by:

    1. Chen, Jing & Huang, Xiaoqi & Liu, Xinghe & Xiong, Hao & Xu, Cheng, 2023. "Self-discipline or self-interest: CEOs’ hometown identity and excess perks," Finance Research Letters, Elsevier, vol. 52(C).
    2. Chen, Jing & Hu, Peiwen & Liu, Shan & Liu, Xinghe, 2024. "Too scared to make mistakes at home: CEO hometown identity and corporate risk-taking," Research in International Business and Finance, Elsevier, vol. 70(PB).
    3. Wang, Xinyue & Cao, Yuqiang & Feng, Zhuoan & Lu, Meiting & Shan, Yaowen, 2023. "Local FinTech development and stock price crash risk," Finance Research Letters, Elsevier, vol. 53(C).
    4. Benkraiem, Ramzi & Ben-Nasr, Hamdi & Nechi, Salem & Rjiba, Hatem, 2023. "Stock price crash risk and leverage dynamics: Evidence from the GCC countries," Finance Research Letters, Elsevier, vol. 54(C).
    5. Liu, Xinghe & Zhong, Weifeng & Chen, Jing, 2023. "Stay home, stay safe: CEO hometown identity and default risk," Finance Research Letters, Elsevier, vol. 57(C).
    6. Liu, Xiujuan & Zhang, Shengnan, 2024. "The impact of credit risk on labor investment efficiency," Finance Research Letters, Elsevier, vol. 61(C).
    7. Wen, Fenghua & Lin, Diyue & Hu, Lei & He, Shaoyi & Cao, Zhiling, 2023. "The spillover effect of corporate frauds and stock price crash risk," Finance Research Letters, Elsevier, vol. 57(C).
    8. Chen, Jing & Hong, Junjie & Zhong, Weifeng & Wang, Chengqi & Liu, Xinghe, 2024. "Doing right at home: Do hometown CEOs curb corporate misconduct?11Chengqi Wang acknowledges the financial support of National Natural Science Foundation of China (No. 72332005). Xinghe Liu acknowledge," Technological Forecasting and Social Change, Elsevier, vol. 205(C).

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