Management equity incentives and stock price crash risk: "Golden handcuffs" or "gold watch".

Abstract

This paper expands the previous research on management equity incentives (MEIs) and stock price crash risk by distinguishing between the "gold watch" region and the "golden handcuff" regions in MEIs. By using an estimation of the gold watch region and the golden handcuff regions based on 6,675 annual observations of China's A-share listed companies, the stock price crash risk is found to be negatively correlated with MEIs in the golden handcuff regions (0-10%, 30%-100%) and is positively correlated with MEIs in the gold watch region (10%-30%). A further investigation of the mediating effects of peer effects on MEIs and the stock price crash risk reveals that peer effects have a partial mediation effect at the level of peer managers' shareholding and mediate the relationship between MEIs and the stock price crash risk.