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Journal of Financial Economics Vol. 101 No. 3 2011

CFOs versus CEOs: Equity incentives and crashes

Jeong‐Bon Kim1; Yinghua Li2,3; Liandong Zhang1,4

1 City University of Hong Kong · 2 Arizona State University · 3 Baruch College · 4 Singapore Management University

open access

Abstract

Using a large sample of U.S. firms for the period 1993–2009, we provide evidence that the sensitivity of a chief financial officer's (CFO) option portfolio value to stock price is significantly and positively related to the firm's future stock price crash risk. In contrast, we find only weak evidence of the positive impact of chief executive officer option sensitivity on crash risk. Finally, we find that the link between CFO option sensitivity and crash risk is more pronounced for firms in non-competitive industries and those with a high level of financial leverage.

DOI
10.1016/j.jfineco.2011.03.013
Volume
101
Issue
3
Pages
713-730
Language
en
Sources
crossref bibtex:phds-export.bib openalex

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