CEO OVERPOWER AND STOCK PRICE CRASH RISK: EVIDENCE FROM FAMILY BUSINESSES IN VIETNAM

Abstract

This study examines how powerful CEOs affect stock price crash risk in Vietnamese family businesses. It focuses on family businesses in Vietnam because the country is actively transforming from a centralized economy into a market economy, which emphasizes the role of private businesses. This study employs Random Effect Models (REM) and dynamic system Generalized Method of Moments (GMM) to analyze a balanced panel of 116 listed family businesses in Vietnam from 2005 to 2020. The findings indicate that family businesses with CEO duality have about a 60% higher crash risk than firms without CEO duality; however, higher CEO ownership reduces the stock price crash risk in family businesses. The findings are robust after the enactment of the Law on Enterprises in Vietnam. The results support agency theory, managerial power theory, organizational theory, and prior literature. It also contributes practical corporate governance implications for managing stock price crash risk in family businesses.