THE IMPACT OF CEO POWER ON STOCK PRICE CRASH RISK IN FAMILY BUSINESSES: EVIDENCE FROM INDONESIA
Keywords:
CEO Power, Family Firms, Non-Family CEO, Stock Price Crash Risk
Abstract
This study analyzes the effect of Chief Executive Officer (CEO) power and non-family CEO status on stock price crash risk in family-owned firms in Indonesia. The study is motivated by agency theory, which emphasizes potential conflicts arising from concentrated managerial power that may harm shareholder interests and capital market stability. A quantitative approach is employed using panel data from 75 family firms listed on the Indonesia Stock Exchange (IDX) during the 2019–2023 period, resulting in 226 firm-year observations. Panel data regression analysis is conducted using STATA to examine the effects of non-family CEO status, CEO power, and their interaction on stock price crash risk. The results show that the presence of a non-family CEO has a negative and significant effect on stock price crash risk, indicating that professional management can reduce information asymmetry. CEO power, when analyzed independently, also exhibits a significant negative effect on crash risk. However, the interaction between non-family CEO status and high CEO power significantly increases stock price crash risk, suggesting opportunistic behavior under weak governance structures. This study concludes that professional leadership must be accompanied by strong corporate governance mechanisms to mitigate financial risk in family-owned firms. The findings provide implications for investors and policymakers.
Downloads
Download data is not yet available.
References
Al Mamun, M., Balachandran, B., & Duong, H. N. (2020). Powerful CEOs and stock price crash risk. Journal of Corporate Finance, 62(January), 101582. https://doi.org/10.1016/j.jcorpfin.2020.101582
Aldahray, A. (2024). Notes Readability and Discretionary Accruals. Revista de Contabilidad-Spanish Accounting Review, 27(2), 229–238. https://doi.org/10.6018/rcsar.459281
Ali, W., Wilson, J., & Husnain, M. (2022). determinants of stock price crash risk : a systematic survey of literature. 2006. https://doi.org/10.1108/MF-12-2021-0603
An, H., & Niu, X. (2024). Are Family Firm Stocks More Prone to Crash? SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4728129
An, Z., Li, D., & Yu, J. (2015). Firm crash risk, information environment, and speed of leverage adjustment. Journal of Corporate Finance, 31, 132–151. https://doi.org/10.1016/j.jcorpfin.2015.01.015
Anggraeni, F., Suhadi, & Hardiningsih, P. (2024). Menjaga Integritas : Analisis Fraud Hexagon Meningkatkan Deteksi Kecurangan Laporan Keuangan Maintaining Integrity : Fraud Hexagon Analysis Enhancing Financial Statement Fraud Detection. Jurnal Akuntansi Universitas Jember, 22(2), 133–152.
Baginski, S. P., Campbell, J. L., Hinson, L. A., & Koo, D. S. (2018). Do career concerns affect the delay of bad news disclosure? Accounting Review, 93(2), 61–95. https://doi.org/10.2308/accr-51848
Bauer, A. M., Fang, X., & Pittman, J. A. (2021). The importance of irs enforcement to stock price crash risk: The role of ceo power and incentives. Accounting Review, 96(4), 81–109. https://doi.org/10.2308/TAR-2018-0375
Brahmana, R. K., You, H. W., & Yong, X. R. (2021). Divestiture strategy, CEO power and firm performance. Management Research Review, 44(3), 418–436. https://doi.org/10.1108/MRR-04-2020-0196
Calabrò, A., Vecchiarini, M., Gast, J., Campopiano, G., De Massis, A., & Kraus, S. (2019). Innovation in Family Firms: A Systematic Literature Review and Guidance for Future Research. International Journal of Management Reviews, 21(3), 317–355. https://doi.org/10.1111/ijmr.12192
Cao, C., Xia, C., & Chan, K. C. (2016). Social trust and stock price crash risk: Evidence from China. International Review of Economics and Finance, 46(September), 148–165. https://doi.org/10.1016/j.iref.2016.09.003
Cui, X., Sun, M., Sensoy, A., Wang, P., & Wang, Y. (2022). Top executives’ great famine experience and stock price crash risk. Research in International Business and Finance, 59(March). https://doi.org/10.1016/j.ribaf.2021.101564
Firmansyah, A., Karyadi, E. A., & Setyaningtyas, H. S. (2020). Manajemen Laba , Pertumbuhan Aset , Return Saham. 18(2), 62–72.
Haghighi, A., & Gerayli, M. S. (2019). Managerial ownership and stock price crash risk : a case of Iranian fi rms. https://doi.org/10.1108/IMEFM-06-2018-0194
Harper, J., Johnson, G., & Sun, L. (2020). Stock price crash risk and CEO power: Firm-level analysis. Research in International Business and Finance, 51(February 2019), 101094. https://doi.org/10.1016/j.ribaf.2019.101094
Hasan, M. M., Taylor, G., & Richardson, G. (2022). Brand Capital and Stock Price Crash Risk. Management Science, 68(10), 7221–7247. https://doi.org/10.1287/mnsc.2021.4197
Haseeb, M., Mahdzan, N. S., & Wan Ahmad, W. M. (2023). Are Shariah-compliant firms less prone to stock price crash risk? Evidence from Malaysia. International Journal of Islamic and Middle Eastern Finance and Management, 16(2), 291–309. https://doi.org/10.1108/IMEFM-06-2021-0223
Itan, I., Ahmad, Z., Setiana, J., & Karjantoro, H. (2024). Corporate governance, tax avoidance and earnings management: family CEO vs non-family CEO managed companies in Indonesia. Cogent Business and Management, 11(1). https://doi.org/10.1080/23311975.2024.2312972
Jensen, M. C., & Meckling, W. H. (2019). Theory of the firm: Managerial behavior, agency costs and ownership structure. Corporate Governance: Values, Ethics and Leadership, 77–132. https://doi.org/10.4159/9780674274051-006
Jiang, F., Cai, X., Nofsinger, J. R., & Zheng, X. (2020). Can reputation concern restrain bad news hoarding in family firms? Journal of Banking and Finance, 114, 105808. https://doi.org/10.1016/j.jbankfin.2020.105808
Kalia, A. (2024). CEO power and stock price crash risk in India: the moderating effect of insider trades. Asian Journal of Economics and Banking, 8(2), 169–198. https://doi.org/10.1108/ajeb-10-2023-0095
Kao, E. H., Huang, H. C., Fung, H. G., & Liu, X. (2020). Co-opted directors, gender diversity, and crash risk: evidence from China. In Review of Quantitative Finance and Accounting (Vol. 55, Issue 2). https://doi.org/10.1007/s11156-019-00850-3
Kelleci, R., Lambrechts, F., Voordeckers, W., & Huybrechts, J. (2019). CEO Personality: A Different Perspective on the Nonfamily Versus Family CEO Debate. Family Business Review, 32(1), 31–57. https://doi.org/10.1177/0894486518811222
Liu, S., & Sickles, R. (2021). The agency problem revisited: a structural analysis of managerial productivity and CEO compensation in large US commercial banks. Empirical Economics, 60(1), 391–418. https://doi.org/10.1007/s00181-020-01982-5
Michiels, A. (2017). Formal compensation practices in family SMEs. Journal of Small Business and Enterprise Development, 24(1), 88–104. https://doi.org/10.1108/JSBED-12-2015-0173
Oanh, T. T. K., Anh, N. V. H., Phung, N. N. Y., & Duong, K. D. (2023). Ceo Overpower and Stock Price Crash Risk: Evidence From Family Businesses in Vietnam. Journal of Eastern European and Central Asian Research, 10(3), 425–438. https://doi.org/10.15549/jeecar.v10i3.1195
Shahab, Y., Ntim, C. G., Ullah, F., & Ye, Z. (2020). CEO power and stock price crash risk in China: Do female directors’ critical mass and ownership structure matter? January. https://doi.org/10.1016/j.irfa.2020.101457
Skorodziyevskiy, V., Chandler, J. A., Chrisman, J. J., Daspit, J. J., & Petrenko, O. V. (2024). The family business CEO: A review of insights and opportunities for advancement. Journal of Small Business Management, 62(6), 2965–3015. https://doi.org/10.1080/00472778.2023.2284912
Sun, K. (2022). CEO power , innovative investment and family board involvement : An empirical study of Chinese family SMEs CEO power , innovative investment and family board involvement : An empirical study of Chinese family SMEs. Cogent Business & Management, 9(1). https://doi.org/10.1080/23311975.2022.2124593
Sun, W., Bai, Y., & Fan, W. (Patrick). (2024). Do Non-Family CEOs Decrease Stock Price Crash Risk in Chinese Family Firms? The Journal of Developing Areas, 58(3), 21–45. https://doi.org/10.1353/jda.2024.a930069
Sun, W., Huang, C., & Su, Z. (2023). How do non-family CEOs influence family firm innovation performance? Management Decision, 61(10), 2945–2972. https://doi.org/10.1108/MD-05-2022-0705
Sun, Y. (2023). Fund style drift and stock price crash risk – analysis of the mediating effect based on corporate financial risk. 13(2), 183–206. https://doi.org/10.1108/CFRI-11-2021-0222
Tabor, W., Chrisman, J. J., Madison, K., & Vardaman, J. M. (2018). Nonfamily Members in Family Firms: A Review and Future Research Agenda. Family Business Review, 31(1), 54–79. https://doi.org/10.1177/0894486517734683
Tang, S. (2023). the Effect of Corporate Governance and Political Connection on Firm Performance in Indonesian Stock Exchange. Media Ekonomi, 30(2), 229–240. https://doi.org/10.25105/me.v30i2.15864
Tang, S., & Fiorentina, F. (2021). Pengaruh Karakteristik Perusahaan, Kinerja Perusahaan, Dan Management Entrenchment Terhadap Manajemen Laba. Jurnal Ekonomi Bisnis Dan Kewirausahaan, 10(2), 121. https://doi.org/10.26418/jebik.v10i2.47461
Waldkirch, M. (2019). Journal of Family Business Strategy Non-family CEOs in family firms : Spotting gaps and challenging assumptions for a future research agenda. Journal of Family Business Strategy, xxxx, 100305. https://doi.org/10.1016/j.jfbs.2019.100305
Wu, K., Fu, Y., & Kong, D. (2022). Does the digital transformation of enterprises affect stock price crash risk? Finance Research Letters, 48(April 2022). https://doi.org/10.1016/j.frl.2022.102888
Xu, D., Chen, C., & Wu, X. (2019). Ownership structure and the use of non-family executives in family-dominated Chinese listed firms: An institutional logics perspective. Asia Pacific Journal of Management, 36(3), 797–820. https://doi.org/10.1007/s10490-017-9550-z
Xu, J., & Zou, L. (2019). The impact of CEO pay and its disclosure on stock price crash risk: evidence from China. China Finance Review International, 9(4), 479–497. https://doi.org/10.1108/CFRI-10-2018-0138
Yopie, S., & Itan, I. (2016). CEO-Family vs. CEO-Nonfamily: Who is a better value creator in family business? Journal of Applied Management Accounting Research, 14(2), 37–46.
Zaman, R., Atawnah, N., Haseeb, M., Nadeem, M., & Irfan, S. (2021). Does corporate eco-innovation affect stock price crash risk? British Accounting Review, 53(5), 101031. https://doi.org/10.1016/j.bar.2021.101031
Zavertiaeva, M., & Ershova, T. (2022). Rule with an iron hand: powerful CEOs, influential shareholders and corporate performance in Russia. European Journal of Management and Business Economics. https://doi.org/10.1108/EJMBE-08-2021-0228
Zhou, J., Li, W., Yan, Z., & Lyu, H. (2021). Controlling shareholder share pledging and stock price crash risk: Evidence from China. International Review of Financial Analysis, 77(October 2020), 101839. https://doi.org/10.1016/j.irfa.2021.101839
Aldahray, A. (2024). Notes Readability and Discretionary Accruals. Revista de Contabilidad-Spanish Accounting Review, 27(2), 229–238. https://doi.org/10.6018/rcsar.459281
Ali, W., Wilson, J., & Husnain, M. (2022). determinants of stock price crash risk : a systematic survey of literature. 2006. https://doi.org/10.1108/MF-12-2021-0603
An, H., & Niu, X. (2024). Are Family Firm Stocks More Prone to Crash? SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4728129
An, Z., Li, D., & Yu, J. (2015). Firm crash risk, information environment, and speed of leverage adjustment. Journal of Corporate Finance, 31, 132–151. https://doi.org/10.1016/j.jcorpfin.2015.01.015
Anggraeni, F., Suhadi, & Hardiningsih, P. (2024). Menjaga Integritas : Analisis Fraud Hexagon Meningkatkan Deteksi Kecurangan Laporan Keuangan Maintaining Integrity : Fraud Hexagon Analysis Enhancing Financial Statement Fraud Detection. Jurnal Akuntansi Universitas Jember, 22(2), 133–152.
Baginski, S. P., Campbell, J. L., Hinson, L. A., & Koo, D. S. (2018). Do career concerns affect the delay of bad news disclosure? Accounting Review, 93(2), 61–95. https://doi.org/10.2308/accr-51848
Bauer, A. M., Fang, X., & Pittman, J. A. (2021). The importance of irs enforcement to stock price crash risk: The role of ceo power and incentives. Accounting Review, 96(4), 81–109. https://doi.org/10.2308/TAR-2018-0375
Brahmana, R. K., You, H. W., & Yong, X. R. (2021). Divestiture strategy, CEO power and firm performance. Management Research Review, 44(3), 418–436. https://doi.org/10.1108/MRR-04-2020-0196
Calabrò, A., Vecchiarini, M., Gast, J., Campopiano, G., De Massis, A., & Kraus, S. (2019). Innovation in Family Firms: A Systematic Literature Review and Guidance for Future Research. International Journal of Management Reviews, 21(3), 317–355. https://doi.org/10.1111/ijmr.12192
Cao, C., Xia, C., & Chan, K. C. (2016). Social trust and stock price crash risk: Evidence from China. International Review of Economics and Finance, 46(September), 148–165. https://doi.org/10.1016/j.iref.2016.09.003
Cui, X., Sun, M., Sensoy, A., Wang, P., & Wang, Y. (2022). Top executives’ great famine experience and stock price crash risk. Research in International Business and Finance, 59(March). https://doi.org/10.1016/j.ribaf.2021.101564
Firmansyah, A., Karyadi, E. A., & Setyaningtyas, H. S. (2020). Manajemen Laba , Pertumbuhan Aset , Return Saham. 18(2), 62–72.
Haghighi, A., & Gerayli, M. S. (2019). Managerial ownership and stock price crash risk : a case of Iranian fi rms. https://doi.org/10.1108/IMEFM-06-2018-0194
Harper, J., Johnson, G., & Sun, L. (2020). Stock price crash risk and CEO power: Firm-level analysis. Research in International Business and Finance, 51(February 2019), 101094. https://doi.org/10.1016/j.ribaf.2019.101094
Hasan, M. M., Taylor, G., & Richardson, G. (2022). Brand Capital and Stock Price Crash Risk. Management Science, 68(10), 7221–7247. https://doi.org/10.1287/mnsc.2021.4197
Haseeb, M., Mahdzan, N. S., & Wan Ahmad, W. M. (2023). Are Shariah-compliant firms less prone to stock price crash risk? Evidence from Malaysia. International Journal of Islamic and Middle Eastern Finance and Management, 16(2), 291–309. https://doi.org/10.1108/IMEFM-06-2021-0223
Itan, I., Ahmad, Z., Setiana, J., & Karjantoro, H. (2024). Corporate governance, tax avoidance and earnings management: family CEO vs non-family CEO managed companies in Indonesia. Cogent Business and Management, 11(1). https://doi.org/10.1080/23311975.2024.2312972
Jensen, M. C., & Meckling, W. H. (2019). Theory of the firm: Managerial behavior, agency costs and ownership structure. Corporate Governance: Values, Ethics and Leadership, 77–132. https://doi.org/10.4159/9780674274051-006
Jiang, F., Cai, X., Nofsinger, J. R., & Zheng, X. (2020). Can reputation concern restrain bad news hoarding in family firms? Journal of Banking and Finance, 114, 105808. https://doi.org/10.1016/j.jbankfin.2020.105808
Kalia, A. (2024). CEO power and stock price crash risk in India: the moderating effect of insider trades. Asian Journal of Economics and Banking, 8(2), 169–198. https://doi.org/10.1108/ajeb-10-2023-0095
Kao, E. H., Huang, H. C., Fung, H. G., & Liu, X. (2020). Co-opted directors, gender diversity, and crash risk: evidence from China. In Review of Quantitative Finance and Accounting (Vol. 55, Issue 2). https://doi.org/10.1007/s11156-019-00850-3
Kelleci, R., Lambrechts, F., Voordeckers, W., & Huybrechts, J. (2019). CEO Personality: A Different Perspective on the Nonfamily Versus Family CEO Debate. Family Business Review, 32(1), 31–57. https://doi.org/10.1177/0894486518811222
Liu, S., & Sickles, R. (2021). The agency problem revisited: a structural analysis of managerial productivity and CEO compensation in large US commercial banks. Empirical Economics, 60(1), 391–418. https://doi.org/10.1007/s00181-020-01982-5
Michiels, A. (2017). Formal compensation practices in family SMEs. Journal of Small Business and Enterprise Development, 24(1), 88–104. https://doi.org/10.1108/JSBED-12-2015-0173
Oanh, T. T. K., Anh, N. V. H., Phung, N. N. Y., & Duong, K. D. (2023). Ceo Overpower and Stock Price Crash Risk: Evidence From Family Businesses in Vietnam. Journal of Eastern European and Central Asian Research, 10(3), 425–438. https://doi.org/10.15549/jeecar.v10i3.1195
Shahab, Y., Ntim, C. G., Ullah, F., & Ye, Z. (2020). CEO power and stock price crash risk in China: Do female directors’ critical mass and ownership structure matter? January. https://doi.org/10.1016/j.irfa.2020.101457
Skorodziyevskiy, V., Chandler, J. A., Chrisman, J. J., Daspit, J. J., & Petrenko, O. V. (2024). The family business CEO: A review of insights and opportunities for advancement. Journal of Small Business Management, 62(6), 2965–3015. https://doi.org/10.1080/00472778.2023.2284912
Sun, K. (2022). CEO power , innovative investment and family board involvement : An empirical study of Chinese family SMEs CEO power , innovative investment and family board involvement : An empirical study of Chinese family SMEs. Cogent Business & Management, 9(1). https://doi.org/10.1080/23311975.2022.2124593
Sun, W., Bai, Y., & Fan, W. (Patrick). (2024). Do Non-Family CEOs Decrease Stock Price Crash Risk in Chinese Family Firms? The Journal of Developing Areas, 58(3), 21–45. https://doi.org/10.1353/jda.2024.a930069
Sun, W., Huang, C., & Su, Z. (2023). How do non-family CEOs influence family firm innovation performance? Management Decision, 61(10), 2945–2972. https://doi.org/10.1108/MD-05-2022-0705
Sun, Y. (2023). Fund style drift and stock price crash risk – analysis of the mediating effect based on corporate financial risk. 13(2), 183–206. https://doi.org/10.1108/CFRI-11-2021-0222
Tabor, W., Chrisman, J. J., Madison, K., & Vardaman, J. M. (2018). Nonfamily Members in Family Firms: A Review and Future Research Agenda. Family Business Review, 31(1), 54–79. https://doi.org/10.1177/0894486517734683
Tang, S. (2023). the Effect of Corporate Governance and Political Connection on Firm Performance in Indonesian Stock Exchange. Media Ekonomi, 30(2), 229–240. https://doi.org/10.25105/me.v30i2.15864
Tang, S., & Fiorentina, F. (2021). Pengaruh Karakteristik Perusahaan, Kinerja Perusahaan, Dan Management Entrenchment Terhadap Manajemen Laba. Jurnal Ekonomi Bisnis Dan Kewirausahaan, 10(2), 121. https://doi.org/10.26418/jebik.v10i2.47461
Waldkirch, M. (2019). Journal of Family Business Strategy Non-family CEOs in family firms : Spotting gaps and challenging assumptions for a future research agenda. Journal of Family Business Strategy, xxxx, 100305. https://doi.org/10.1016/j.jfbs.2019.100305
Wu, K., Fu, Y., & Kong, D. (2022). Does the digital transformation of enterprises affect stock price crash risk? Finance Research Letters, 48(April 2022). https://doi.org/10.1016/j.frl.2022.102888
Xu, D., Chen, C., & Wu, X. (2019). Ownership structure and the use of non-family executives in family-dominated Chinese listed firms: An institutional logics perspective. Asia Pacific Journal of Management, 36(3), 797–820. https://doi.org/10.1007/s10490-017-9550-z
Xu, J., & Zou, L. (2019). The impact of CEO pay and its disclosure on stock price crash risk: evidence from China. China Finance Review International, 9(4), 479–497. https://doi.org/10.1108/CFRI-10-2018-0138
Yopie, S., & Itan, I. (2016). CEO-Family vs. CEO-Nonfamily: Who is a better value creator in family business? Journal of Applied Management Accounting Research, 14(2), 37–46.
Zaman, R., Atawnah, N., Haseeb, M., Nadeem, M., & Irfan, S. (2021). Does corporate eco-innovation affect stock price crash risk? British Accounting Review, 53(5), 101031. https://doi.org/10.1016/j.bar.2021.101031
Zavertiaeva, M., & Ershova, T. (2022). Rule with an iron hand: powerful CEOs, influential shareholders and corporate performance in Russia. European Journal of Management and Business Economics. https://doi.org/10.1108/EJMBE-08-2021-0228
Zhou, J., Li, W., Yan, Z., & Lyu, H. (2021). Controlling shareholder share pledging and stock price crash risk: Evidence from China. International Review of Financial Analysis, 77(October 2020), 101839. https://doi.org/10.1016/j.irfa.2021.101839
Published
2026-01-27
How to Cite
Tang, S., Septiany, S., Harsono, B., Serly, S., & Nurpavitia, I. (2026, January 27). THE IMPACT OF CEO POWER ON STOCK PRICE CRASH RISK IN FAMILY BUSINESSES: EVIDENCE FROM INDONESIA. Jurnal Akuntansi Dan Keuangan (JAK), 31(1), 24-36. https://doi.org/https://doi.org/10.23960/jak.v31i1.4594
Section
Articles
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
Jurnal Akutansi dan Keuangan allows readers to read, download, copy, distribute, print, search, or link to the full texts of its articles and allow readers to use them for any other lawful purpose. The journal allows the author(s) to hold the copyright without restrictions. Finally, the journal allows the author(s) to retain publishing rights without restrictions
Authors are allowed to archive their submitted article in an open access repository
Authors are allowed to archive the final published article in an open access repository with an acknowledgment of its initial publication in this journal
