Summary:
The stability of the capital market is vital for economic growth, and the substantial drop in the stock price of listed firms will reduce the operating efficiency of the capital market and weaken its financing function for the real economy. The Central Economic Work Conference in 2020 pointed out that it is necessary to “promote the healthy development of the capital market and improve the quality of listed firms.” Therefore, it is important to identify the determinants of listed firms' stock price crash risk to prevent systemic financial risk. In this paper, we manually collect the resume data of senior executives of A-share listed firms in China in 2010-2019, identify their working experiences, and examine the impact of senior executives' media experience on stock price crash risk from the perspective of executives' media experience and corporate information disclosure. The results show that senior executives' media experience will increase corporate stock price crash risk. We conduct multiple tests to address the endogeneity concerns, including the use of propensity score matching and a treatment effect model. The results of these tests confirm the robustness of the conclusions. We find that the effect of executives' media experience is more pronounced in firms with poorer operating performance, with executive shareholding, with poorer external auditing, and with analyst following. We further investigate the mechanisms through which executives' media experience affects stock price crash risk, and find that executives' media experience can increase stock price crash risk through a reduction in the quality of corporate information disclosure and negative information being covered up. This paper contributes to the literature in three aspects. First, this paper expands the studies on the determinants of corporate stock price crash risk. Existing studies have focused on management behavior, investor behavior, and the external environment, but have rarely looked at executives' media experience, which directly affects information asymmetry. Second, this paper deepens understanding of media governance and examines the impact of employing executives with media experience on corporate stock price crash risk. The important role of the media in firms has been widely recognized; however, contemporary studies have mainly discussed the corporate governance role of the media and few studies have discussed firms' connection with the media and the impact of this connection on firm behavior. Third, this paper enriches the literature surrounding the impact of executives' characteristics on firm behavior. In recent years, there have been many studies focusing on the role of executives' characteristics on firm behavior, including political connections, academic experience, financial experience, and military experience, but media experience has rarely been included. Although several studies have discussed the economic consequences of executives' media experience, there is a lack of studies on the impact of executives' media experience on corporate stock price crash risk. The conclusions of this paper have reference significance for firms, investors, and regulators. For firms, this paper confirms that executives' media experience will increase corporate stock price crash risk and damage to the stakeholders. Therefore, when deciding whether to hire executives with media experience, firms should comprehensively consider their own operating conditions and governance mechanisms to avoid the negative effect of executives' media experience. In addition, investors need to pay attention to the media experience of corporate senior executives when making investment decisions. For firms with executives with media experience, investors should actively contact the firms' investment relation management department to obtain more information and reduce the information asymmetry caused by their information management. For regulatory authorities, it is necessary to strengthen both the regulatory requirement for information disclosure by listed firms and the punishment for the violation of information disclosure.
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