Abstract

This study analyzes the effect of Co－CEO structure on stock price crash risk. Specifically, it investigates how a company’s appointment of multiple CEOs affects stock price crash risk, a proxy for information asymmetry. In addition, the study investigates whether the relationship between the Co－CEO structure and stock price crash risk appears differentially depending on whether all CEO hold firm’s stock. As a result of a analysis of 15,544 listed company－year samples from 2011 to 2020, the main empirical analysis results are as follows. First, the Co－CEO structure showed a negative relationship with the stock price crash risk. This result suggest that the Co－CEO structure serves as a corporate governance structure through mutual checks and monitoring between managers, reducing the phenomenon of a sharp decline in stock prices. Second, we observed that the negative relationship between Co－CEO and stock price crash risk was more pronounced in samples where multiple managers all owned the stocks of the company. This result means that the agency problem is alleviated as multiple CEOs hold stocks in the company, reducing information asymmetry between shareholders and managers. This study has the following contributions. First, this study provides useful implications to capital market participants by re－examining the mixed results related to the effectiveness of the Co－CEO structure by revealing that stock price crash declines when multiple managers are appointed. Second, the study suggests that the effect of Co－CEO structure reducing stock price crash risk is differentiated depending on whether or not managers have stock ownership, providing practical implications for management compensation contracts.

Keywords

• co－CEO structure
• stock price crash risk
• stock ownership
• information asymmetry
• corporate governance

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