Military Experience and Stock Price Crash Risk: Evidence from China

We test whether military experience of CEOs or chairmen affects stock price crash risk. We find robust evidence that CEOs’ or chairmen’s military experience reduces crash risk. Our finding holds for various robustness checks including controlling for some additional characteristics of chairmen or CEOs and controlling for management individuals fixed effects, instrumental variable estimations, and difference-in-differences analysis based on a propensity-score-matched sample. Further analyses indicate that (1) military experience gained from the armed forces and regions with high political risk is more effective in decreasing stock price crash risk; (2) the negative relationship between military experience and crash risk is more significant in regions with lower sense of obedience and sense of social responsibility and for firms with less external monitoring. Finally, we find that obedience and social responsibility are the two channels through which military experience affects crash risk.