Skin in the game: Does outside directors’ equity-based compensation induce or mitigate stock price crash risk?

IF 3.3 3区管理学 Q1 BUSINESS, FINANCE

Journal of Accounting and Public Policy Pub Date : 2025-03-18 DOI:10.1016/j.jaccpubpol.2025.107308

Yuting Qian , Bo Qin , Weiqiang Tan , Daifei Troy Yao

{"title":"Skin in the game: Does outside directors’ equity-based compensation induce or mitigate stock price crash risk?","authors":"Yuting Qian , Bo Qin , Weiqiang Tan , Daifei Troy Yao","doi":"10.1016/j.jaccpubpol.2025.107308","DOIUrl":null,"url":null,"abstract":"<div><div>This study examines the relationship between outside directors’ equity-based compensation (DEC) and stock price crash risk using a sample of U.S. firms from 2008 to 2021. We find that DEC is associated with lower crash risk, primarily through its role in reducing over-investment, financial misreporting, and bad news hoarding<strong>—</strong>suggesting that enhanced director monitoring mitigates key crash risk factors. Subsample analyses reveal that the DEC-crash relationship is more pronounced when monitoring demands are higher, such as with greater information asymmetry, agency costs, audit risk, and transient institutional ownership. The impact of DEC also varies with director attributes, including busyness, gender diversity, and quad-qualification. Overall, our findings highlight that equity pay can align outside directors’ interests with shareholders by strengthening risk oversight, offering insights into optimal compensation contracts and governance mechanisms to mitigate crash risk.</div></div>","PeriodicalId":48070,"journal":{"name":"Journal of Accounting and Public Policy","volume":"51 ","pages":"Article 107308"},"PeriodicalIF":3.3000,"publicationDate":"2025-03-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Accounting and Public Policy","FirstCategoryId":"91","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0278425425000274","RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}

引用次数: 0

Abstract

This study examines the relationship between outside directors’ equity-based compensation (DEC) and stock price crash risk using a sample of U.S. firms from 2008 to 2021. We find that DEC is associated with lower crash risk, primarily through its role in reducing over-investment, financial misreporting, and bad news hoarding—suggesting that enhanced director monitoring mitigates key crash risk factors. Subsample analyses reveal that the DEC-crash relationship is more pronounced when monitoring demands are higher, such as with greater information asymmetry, agency costs, audit risk, and transient institutional ownership. The impact of DEC also varies with director attributes, including busyness, gender diversity, and quad-qualification. Overall, our findings highlight that equity pay can align outside directors’ interests with shareholders by strengthening risk oversight, offering insights into optimal compensation contracts and governance mechanisms to mitigate crash risk.

查看原文本刊更多论文

求助全文

约1分钟内获得全文求助全文

来源期刊

Journal of Accounting and Public Policy Multiple-

CiteScore

4.80

自引率

2.80%

发文量

期刊介绍： The Journal of Accounting and Public Policy publishes research papers focusing on the intersection between accounting and public policy. Preference is given to papers illuminating through theoretical or empirical analysis, the effects of accounting on public policy and vice-versa. Subjects treated in this journal include the interface of accounting with economics, political science, sociology, or law. The Journal includes a section entitled Accounting Letters. This section publishes short research articles that should not exceed approximately 3,000 words. The objective of this section is to facilitate the rapid dissemination of important accounting research. Accordingly, articles submitted to this section will be reviewed within fours weeks of receipt, revisions will be limited to one, and publication will occur within four months of acceptance.