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Bearing an imprint: CEOs' early-life experience of the Great Chinese Famine and stock price crash risk

Author

Listed:
  • Long, Wenbin
  • Tian, Gary Gang
  • Hu, Jun
  • Yao, Daifei (Troy)
Abstract
We propose and test whether adverse life events experienced by CEOs are associated with firms' stock price crash risk. Based on a large sample of Chinese companies from 2000 to 2015, we find evidence that companies whose CEOs experienced the Great Chinese Famine in early life have lower stock price crash risk than those with CEOs who did not experience the famine. Further, the negative association between famine experience and crash risk is more pronounced for firms whose CEOs have greater decision-making powers and for non-State-owned enterprises. We also find direct links between famine experience and various factors that have already been documented as determinants of crash risk. Our results support behavior economics theory on imprinting: CEO memories of adverse life experiences have an indelible effect on their decision-making processes, which in turn influence how the financial information is provided and disclosed to the stock market.

Suggested Citation

  • Long, Wenbin & Tian, Gary Gang & Hu, Jun & Yao, Daifei (Troy), 2020. "Bearing an imprint: CEOs' early-life experience of the Great Chinese Famine and stock price crash risk," International Review of Financial Analysis, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:finana:v:70:y:2020:i:c:s105752192030154x
    DOI: 10.1016/j.irfa.2020.101510
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    Keywords

    CEO early-life experiences; Great Chinese famine; Stock price crash risk; Imprinting theory;
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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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