CEOs’ Decision-making Power and Stock Price Crash Risk: Evidence from Iran

This paper aims to examine how the chief executive officer’s (CEO) decision-making power affects stock price crash risk. Using an index that encompasses CEO duality, ownership power, and CEO tenure as the sources of CEO power and negative conditional return skewness to measure stock price crash risk, empirical findings sufficiently reveal that there is a significant and inverse relationship between CEOs’ decision-making power and stock price crash risk. The results prove that among three determinant of CEOs’ decision-making power, CEO tenure has the most significant impact on decision-making power. The paper reliably provides sufficient evidence of CEOs’ decision-making power implications and progressively expands the academic literature on stock price crash risk. These findings provide further insights on the importance of CEO power in driving stock price crash risk and emphasize that improving CEOs’ decision-making power mitigates stock price crash risk in the context of Iran as a developing country.