CEO Power and Stock Price Crash Risk: Evidence from Chinese Industries
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CEO Power and Stock Price Crash Risk: Evidence from Chinese Industries

Jiahua Li 1, Shuyu Teng 2, Mengtian Xu 3, Jingyi Yan 4*
1 South China Agricultural University
2 Xi'an Jiaotong-Liverpool University
3 University of Nottingham Ningbo China
4 Capital Normal University
*Corresponding author: 2499873612@qq.com
Published on 19 November 2025
Volume Cover
AEMPS Vol.241
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-80590-541-7
ISBN (Online): 978-1-80590-542-4
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Abstract

Whether CEO power concentration exacerbates or mitigates stock price crash risk is a critical concern in corporate governance and financial market stability. Using a sample from Chinese A-share listed companies (2018–2022), this study employs a quasi-experimental design by estimating a multi-dimensional fixed effects linear model to empirically examine the impact of CEO power on future crash risk, with a focus on the moderating role of the single-control structure ("One Control One"). The results reveal that: (1) Greater CEO power significantly increases stock price crash risk; (2) Significant industry heterogeneity exists, indicating that industry characteristics moderate this relationship, pointing towards implications for targeted regulation; (3) The "One Control One" governance structure amplifies CEO power’s detrimental impact by weakening internal monitoring mechanisms. These findings indicate that powerful CEOs act as significant contributors to heightened crash risk in China’s emerging market, particularly under concentrated control structures. This research provides critical insights for policymakers and corporations to design industry-specific governance frameworks that balance CEO authority with effective oversight.

Keywords:

CEO power, stock price crash risk, One Control One, corporate governance

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Li,J.;Teng,S.;Xu,M.;Yan,J. (2025). CEO Power and Stock Price Crash Risk: Evidence from Chinese Industries. Advances in Economics, Management and Political Sciences,241,40-58.

References

[1]. JIN, L., & MYERS, S. (2006). R2 around the world: New theory and new tests☆. Journal of Financial Economics, 79(2), 257–292.

[2]. Hutton, A. P., Marcus, A. J., & Tehranian, H. (2009). Opaque financial reports, R2, and crash risk. Journal of Financial Economics, 94(1), 67–86.

[3]. Kousenidis, D. V., Ladas, A. C., & Negakis, C. I. (2014). Accounting conservatism quality of accounting information and crash risk of stock prices. The Journal of Economic Asymmetries, 11, 120–137. https: //doi.org/10.1016/j.jeca.2014.09.001

[4]. Xu, N., Yu, S., & Yi, Z. (2013). Institutional investors’ herding behavior and stock price crash risk. Journal of Management World. (7), 31–43.

[5]. Jiang, J., Qiu, J., Zhu, R., & Hu, H. (2020, March). Investor attention and stock price crash risk: Mitigation or aggravation? Securities Market Herald. 69-78.

[6]. Caldara, D., & Iacoviello, M. (2018). Measuring Geopolitical Risk. International Finance Discussion Paper, 2018(1222), 1–66.

[7]. Kim, J.-B., Li, Y., & Zhang, L. (2011). Corporate tax avoidance and stock price crash risk: Firm-level analysis. Journal of Financial Economics, 100(3), 639–662.

[8]. Ren, H., Xu, Y., & Wu, J. (2024). Controlling shareholders’ stock pledges and stock price crash risks. Finance Research Letters, 68, 105956. https: //doi.org/10.1016/j.frl.2024.105956

[9]. Tan, Q. M., Liu, N., & Dong, X. F. (2015). CEO power, property rights nature, and innovation performance. Journal of Harbin Institute of Technology (Social Sciences Edition), 17(3), 126–134. https: //doi.org/10.16822/j.cnki.hitskb.2015.03.017

[10]. Onali, E., Galiakhmetova, R., Molyneux, P., & Torluccio, G. (2016). CEO power, government monitoring, and bank dividends. Journal of Financial Intermediation, 27, 89–117. https: //doi.org/10.1016/j.jfi.2015.08.001

[11]. Shi, H. B., & Yang, D. (2017). The impact of CEO power allocation on enterprise ambidextrous innovation. Soft Science, 31(11), 49–51, 61. https: //doi.org/10.13956/j.ss.1001-8409.2017.11.11

[12]. Shao, Y. H., Ding, Q., & Bao, Q. (2022). CEO power intensity and enterprise ambidextrous innovation investment decisions: Moderating effects of marketization level and internal control. Science & Technology Progress and Policy, 39(4), 131–140.

[13]. Zhang, W. J., Li, K., & Wang, S. M. (2018). The internal mechanism of board capital on corporate innovation under the moderating role of CEO power. Management Review, 30(4), 70–82. https: //doi.org/10.14120/j.cnki.cn11-5057/f.2018.04.007

[14]. Wang, N., He, J., & Huang, J. (2017). The impact of board capital and CEO power on R& D investment: Evidence from GEM listed companies. Commercial Research, (1), 108–117. https: //doi.org/10.13902/j.cnki.syyj.2017.01.014

[15]. Zhou, J., Jin, Y. Y., & Yuan, D. L. (2013). The impact of board human capital and CEO power on enterprise R&D investment: Empirical evidence from high-tech listed companies in Shanghai and Shenzhen. Science of Science and Management of S.& T., 34(3), 170–180.

[16]. Liu, J. M., & Zhou, S. (2018). The impact of R&D innovation investment on GEM enterprise performance from the perspective of CEO power. Journal of Southwest University of Political Science & Law, 20(3), 118–126.

[17]. Morse, A., Nanda, V. K., & Seru, A. (2008). Are incentive contracts rigged by powerful ceos? SSRN Electronic Journal. https: //doi.org/10.2139/ssrn.687504

[18]. KHANNA, V., KIM, E. H., & LU, Y. (2015). CEO connectedness and corporate fraud. The Journal of Finance, 70(3), 1203–1252. https: //doi.org/10.1111/jofi.12243

[19]. Al Mamun, M., Balachandran, B., & Duong, H. N. (2020). Powerful CEOs and stock price crash risk. Journal of Corporate Finance, 62, 101582. https: //doi.org/10.1016/j.jcorpfin.2020.101582

[20]. Zheng, Z., Li, D., Zhong, T., Wang, T, & He, L. (2023). CEO facial structure and stock pricecrash risk, Accounting & Finance, 63(S1), 873-905. https: //doi.org/10.1111/acfi.13069

[21]. Ma, D., & Wu, W. (2024). Experience as a double-edged sword: CEO experience and power on breakthrough innovation. Management Decision. https: //doi.org/10.1108/md-12-2023-2268

[22]. Xu, L., Rao, Y., Cheng, Y., & Wang, J. (2020). Internal coalition and stock price crash risk. Journal of Corporate Finance, 64, 101640. https: //doi.org/10.1016/j.jcorpfin.2020.101640

[23]. Zhao, T., Wei, H., & Li, H. (2022). CEO characteristics and stock price crash risk warning. Journal of Fujian Business University, 42–49. CNKI. https: //doi.org/10.19473/j.cnki.1008-4940.2022.05.006

[24]. Saiyed, A. A., Tatoglu, E., Ali, S., & Dutta, D. K. (2023). Entrepreneurial orientation, CEO power and firm performance: An upper echelons theory perspective. Management Decision, 61(6). https: //doi.org/10.1108/md-05-2022-0641

[25]. Hu, J. (2009). “One control many” companies: Empirical analysis and theoretical explanation. Securities Market Herald, 8, 51–58.

[26]. La Porta, R., Lopez de Silanes, F., & Shleifer, A. (1998). Corporate ownership around the world. SSRN Electronic Journal, 54(2). https: //doi.org/10.2139/ssrn.103130

[27]. Cao, Y. (2025). Managerial power, bad news withholding and stock price crash risk. CNKI. https: //doi.org/10.27660/d.cnki.gzczu.2023.000605

[28]. Abadie, A., & Imbens, G. W. (2016). Matching on the estimated propensity score. Econometrica, 84(2), 781–807. https: //doi.org/10.3982/ecta11293

References

[1]. JIN, L., & MYERS, S. (2006). R2 around the world: New theory and new tests☆. Journal of Financial Economics, 79(2), 257–292.

[2]. Hutton, A. P., Marcus, A. J., & Tehranian, H. (2009). Opaque financial reports, R2, and crash risk. Journal of Financial Economics, 94(1), 67–86.

[3]. Kousenidis, D. V., Ladas, A. C., & Negakis, C. I. (2014). Accounting conservatism quality of accounting information and crash risk of stock prices. The Journal of Economic Asymmetries, 11, 120–137. https: //doi.org/10.1016/j.jeca.2014.09.001

[4]. Xu, N., Yu, S., & Yi, Z. (2013). Institutional investors’ herding behavior and stock price crash risk. Journal of Management World. (7), 31–43.

[5]. Jiang, J., Qiu, J., Zhu, R., & Hu, H. (2020, March). Investor attention and stock price crash risk: Mitigation or aggravation? Securities Market Herald. 69-78.

[6]. Caldara, D., & Iacoviello, M. (2018). Measuring Geopolitical Risk. International Finance Discussion Paper, 2018(1222), 1–66.

[7]. Kim, J.-B., Li, Y., & Zhang, L. (2011). Corporate tax avoidance and stock price crash risk: Firm-level analysis. Journal of Financial Economics, 100(3), 639–662.

[8]. Ren, H., Xu, Y., & Wu, J. (2024). Controlling shareholders’ stock pledges and stock price crash risks. Finance Research Letters, 68, 105956. https: //doi.org/10.1016/j.frl.2024.105956

[9]. Tan, Q. M., Liu, N., & Dong, X. F. (2015). CEO power, property rights nature, and innovation performance. Journal of Harbin Institute of Technology (Social Sciences Edition), 17(3), 126–134. https: //doi.org/10.16822/j.cnki.hitskb.2015.03.017

[10]. Onali, E., Galiakhmetova, R., Molyneux, P., & Torluccio, G. (2016). CEO power, government monitoring, and bank dividends. Journal of Financial Intermediation, 27, 89–117. https: //doi.org/10.1016/j.jfi.2015.08.001

[11]. Shi, H. B., & Yang, D. (2017). The impact of CEO power allocation on enterprise ambidextrous innovation. Soft Science, 31(11), 49–51, 61. https: //doi.org/10.13956/j.ss.1001-8409.2017.11.11

[12]. Shao, Y. H., Ding, Q., & Bao, Q. (2022). CEO power intensity and enterprise ambidextrous innovation investment decisions: Moderating effects of marketization level and internal control. Science & Technology Progress and Policy, 39(4), 131–140.

[13]. Zhang, W. J., Li, K., & Wang, S. M. (2018). The internal mechanism of board capital on corporate innovation under the moderating role of CEO power. Management Review, 30(4), 70–82. https: //doi.org/10.14120/j.cnki.cn11-5057/f.2018.04.007

[14]. Wang, N., He, J., & Huang, J. (2017). The impact of board capital and CEO power on R& D investment: Evidence from GEM listed companies. Commercial Research, (1), 108–117. https: //doi.org/10.13902/j.cnki.syyj.2017.01.014

[15]. Zhou, J., Jin, Y. Y., & Yuan, D. L. (2013). The impact of board human capital and CEO power on enterprise R&D investment: Empirical evidence from high-tech listed companies in Shanghai and Shenzhen. Science of Science and Management of S.& T., 34(3), 170–180.

[16]. Liu, J. M., & Zhou, S. (2018). The impact of R&D innovation investment on GEM enterprise performance from the perspective of CEO power. Journal of Southwest University of Political Science & Law, 20(3), 118–126.

[17]. Morse, A., Nanda, V. K., & Seru, A. (2008). Are incentive contracts rigged by powerful ceos? SSRN Electronic Journal. https: //doi.org/10.2139/ssrn.687504

[18]. KHANNA, V., KIM, E. H., & LU, Y. (2015). CEO connectedness and corporate fraud. The Journal of Finance, 70(3), 1203–1252. https: //doi.org/10.1111/jofi.12243

[19]. Al Mamun, M., Balachandran, B., & Duong, H. N. (2020). Powerful CEOs and stock price crash risk. Journal of Corporate Finance, 62, 101582. https: //doi.org/10.1016/j.jcorpfin.2020.101582

[20]. Zheng, Z., Li, D., Zhong, T., Wang, T, & He, L. (2023). CEO facial structure and stock pricecrash risk, Accounting & Finance, 63(S1), 873-905. https: //doi.org/10.1111/acfi.13069

[21]. Ma, D., & Wu, W. (2024). Experience as a double-edged sword: CEO experience and power on breakthrough innovation. Management Decision. https: //doi.org/10.1108/md-12-2023-2268

[22]. Xu, L., Rao, Y., Cheng, Y., & Wang, J. (2020). Internal coalition and stock price crash risk. Journal of Corporate Finance, 64, 101640. https: //doi.org/10.1016/j.jcorpfin.2020.101640

[23]. Zhao, T., Wei, H., & Li, H. (2022). CEO characteristics and stock price crash risk warning. Journal of Fujian Business University, 42–49. CNKI. https: //doi.org/10.19473/j.cnki.1008-4940.2022.05.006

[24]. Saiyed, A. A., Tatoglu, E., Ali, S., & Dutta, D. K. (2023). Entrepreneurial orientation, CEO power and firm performance: An upper echelons theory perspective. Management Decision, 61(6). https: //doi.org/10.1108/md-05-2022-0641

[25]. Hu, J. (2009). “One control many” companies: Empirical analysis and theoretical explanation. Securities Market Herald, 8, 51–58.

[26]. La Porta, R., Lopez de Silanes, F., & Shleifer, A. (1998). Corporate ownership around the world. SSRN Electronic Journal, 54(2). https: //doi.org/10.2139/ssrn.103130

[27]. Cao, Y. (2025). Managerial power, bad news withholding and stock price crash risk. CNKI. https: //doi.org/10.27660/d.cnki.gzczu.2023.000605

[28]. Abadie, A., & Imbens, G. W. (2016). Matching on the estimated propensity score. Econometrica, 84(2), 781–807. https: //doi.org/10.3982/ecta11293

Cite this article

Li,J.;Teng,S.;Xu,M.;Yan,J. (2025). CEO Power and Stock Price Crash Risk: Evidence from Chinese Industries. Advances in Economics, Management and Political Sciences,241,40-58.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

About volume

Volume title: Proceedings of ICFTBA 2025 Symposium: Global Trends in Green Financial Innovation and Technology

ISBN: 978-1-80590-541-7(Print) / 978-1-80590-542-4(Online)
Editor: Lukáš Vartiak, Sun Huaping
Conference website: https://www.icftba.org/Beijing.html
Conference date: 20 November 2025
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.241
ISSN: 2754-1169(Print) / 2754-1177(Online)

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