CEOs’ Managerial Ability and Stock Market Crash Risk: Empirical Evidences from the Business Environment in Saudi Arabia

Authors

M. M. Aldoseri, Department of Finance, College of Business Administration, Prince Sattam bin Abdulaziz University, Al-Kharj, Saudi ArabiaFollow
M. M. Albaz, Department of Accounting and Auditing, Faculty of Commerce, Suez Canal University, Ismailia, EgyptFollow

Abstract

The main objective of the study is to examine the impact of CEOs’ managerial ability on stock market crash risk faced by non-financial firms listed in Saudi stock exchange. The study is based on an analytic approach that is an analysis of annual reports from Saudi companies. A sample of 112 non-financial companies listed in Saudi stock exchange from 2018 to 2020 with total 336 views is examined. This sample is examined for the purpose of evaluating the impact of the managerial ability on crash risk of the stock market. In addition, multiple regression method is applied to test the hypotheses of the study. The findings of this paper show that CEOs’ managerial ability is associated with a negative correlation, and also reveals stock market crash risk. Based on these findings, the study recommends that companies necessarily take into consideration CEOs’ managerial ability (such as accounting background, expertise, office hours, personal skills, reputation, and communication skills) because of their positive effects on the company’s economy. The study also recommends rules and regulations under which CEO should work, his/her overconfidence is reduced, employees are prevented from withholding bad news, and transparency is ensured. All of this reduces stock market crash risk. The findings of the study must be handled according to the sample size and methods of measuring the variables used. The study focused on the analysis of the impact of CEOs’ managerial ability on stock market crash risk in non-financial companies listed in Saudi stock exchange. The findings of this study may be a matter of concern to boards of directors. The findings help them make the decisions to recruit CEOs, and stakeholders when they evaluate the role of managerial skills in reducing stock market crash risk. The study explains the role of the managerial ability in reducing crash risk of the stock market in the Saudi business environment as an example of the economy of developing countries.

Recommended Citation

M. Aldoseri, M. and M. Albaz, M. (2023) "CEOs’ Managerial Ability and Stock Market Crash Risk: Empirical Evidences from the Business Environment in Saudi Arabia," Information Sciences Letters: Vol. 12 : Iss. 4 , PP -.
Available at: https://digitalcommons.aaru.edu.jo/isl/vol12/iss4/7