CEO Duality and Stock Price Crash Risk: Evidence from China

This study explores the influences of CEOs’ dual roles (a single individual serving as both CEO and board chair) on future stock price crash risk. CEO duality magnifies managerial incentive and ability to overstate performance and hide bad news from investors, which increases stock price crashes. Using a unique sample of Chinese firms for the period 2004-2014, we present evidence that CEO duality is positively associated with firm-specific stock price crash risk. In addition, we find that the impact of CEO duality on increasing crash risk is more pronounced for firms with high information asymmetry, namely those with relatively higher R&D expenditure, higher advertising expenditure, lower product market competition, and lower analyst coverage.