IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v255y2025ics0165176525003970.html

Geopolitical risk, CEO war experience, and stock price crash risk: Evidence from Korea

Author

Listed:
  • Choi, Moonseok
  • Han, Seung Hun
  • Kim, Dongjoon

Abstract

This study examines the effect of the CEO war experience on the relationship between North Korea geopolitical risk (NKR) and stock price crash risk. Utilizing KOSPI and KOSDAQ listed firms expanding from 2011 to 2022, we find that the heightened NKR significantly increases firms' stock price crash risk. War-experienced CEOs decrease the stock price crash risk by voluntarily disclosing information to stakeholders, which supports the information transparency mechanism. Those results are consistent with several robustness tests.

Suggested Citation

  • Choi, Moonseok & Han, Seung Hun & Kim, Dongjoon, 2025. "Geopolitical risk, CEO war experience, and stock price crash risk: Evidence from Korea," Economics Letters, Elsevier, vol. 255(C).
    • Handle: RePEc:eee:ecolet:v:255:y:2025:i:c:s0165176525003970
    DOI: 10.1016/j.econlet.2025.112560
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176525003970
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2025.112560?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Lee, Geesun, 2024. "The impact of North Korean nuclear threat on stock market linkages in Northeast Asia: The case of South Korea, China, and Japan," Finance Research Letters, Elsevier, vol. 66(C).
    2. Adra, Samer & Gao, Yang & Huang, Jin & Yuan, Jiayi, 2023. "Geopolitical risk and corporate payout policy," International Review of Financial Analysis, Elsevier, vol. 87(C).
    3. Fiorillo, Paolo & Meles, Antonio & Pellegrino, Luigi Raffaele & Verdoliva, Vincenzo, 2024. "Geopolitical risk and stock price crash risk: The mitigating role of ESG performance," International Review of Financial Analysis, Elsevier, vol. 91(C).
    4. Choi, Sanghak & Jung, Hail & Kim, Daejin, 2021. "War-experienced CEOs and corporate policies: Evidence from the Korean war," Emerging Markets Review, Elsevier, vol. 47(C).
    5. Marianne Bertrand & Antoinette Schoar, 2003. "Managing with Style: The Effect of Managers on Firm Policies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1169-1208.
    6. Jae-Hyun Cho, 2024. "The effect of geopolitical risk on corporate cash holdings: evidence from Korea," Applied Economics Letters, Taylor & Francis Journals, vol. 31(13), pages 1159-1165, July.
    7. Ray Ball, 2009. "Market and Political/Regulatory Perspectives on the Recent Accounting Scandals," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 47(2), pages 277-323, May.
    8. Pástor, Ľuboš & Veronesi, Pietro, 2013. "Political uncertainty and risk premia," Journal of Financial Economics, Elsevier, vol. 110(3), pages 520-545.
    9. Choi, Sanghak & Jung, Hail, 2021. "Does early-life war exposure of a CEO enhance corporate information transparency?," Journal of Business Research, Elsevier, vol. 136(C), pages 198-208.
    10. Chen, Joseph & Hong, Harrison & Stein, Jeremy C., 2001. "Forecasting crashes: trading volume, past returns, and conditional skewness in stock prices," Journal of Financial Economics, Elsevier, vol. 61(3), pages 345-381, September.
    11. Huang, He & Qiu, Yancheng, 2025. "Does geopolitical risk raise or lower corporate credit spreads?," Economics Letters, Elsevier, vol. 247(C).
    12. Alam, Ahmed W. & Farjana, Ashupta & Houston, Reza, 2024. "Geopolitical risk, CEO power, and corporate lobbying: Do powerful CEOs lobby more?," Finance Research Letters, Elsevier, vol. 62(PA).
    13. Engle, Robert F. & Campos-Martins, Susana, 2023. "What are the events that shake our world? Measuring and hedging global COVOL," Journal of Financial Economics, Elsevier, vol. 147(1), pages 221-242.
    14. S. P. Kothari & Susan Shu & Peter D. Wysocki, 2009. "Do Managers Withhold Bad News?," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 47(1), pages 241-276, March.
    15. Bryan Kelly & Ľuboš Pástor & Pietro Veronesi, 2016. "The Price of Political Uncertainty: Theory and Evidence from the Option Market," Journal of Finance, American Finance Association, vol. 71(5), pages 2417-2480, October.
    16. Chang, Xin & Chen, Yangyang & Zolotoy, Leon, 2017. "Stock Liquidity and Stock Price Crash Risk," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 52(4), pages 1605-1637, August.
    17. Yaghoubi, Mona, 2024. "Executive characteristics as moderators: Exploring the impact of geopolitical risk on capital structure decisions," International Review of Financial Analysis, Elsevier, vol. 93(C).
    18. Ulrike Malmendier & Geoffrey Tate & Jon Yan, 2011. "Overconfidence and Early‐Life Experiences: The Effect of Managerial Traits on Corporate Financial Policies," Journal of Finance, American Finance Association, vol. 66(5), pages 1687-1733, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jacky Yuk-Chow So & Un Loi Lao, 2025. "Economic Policy Uncertainty, Geopolitical Risk, and the U.S.–China Relations: A Risk Transmission Perspective," JRFM, MDPI, vol. 18(11), pages 1-23, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wadhwa, Kavita & Goodell, John W., 2024. "Political uncertainty and stock price crash risk: Insights from state-elections in an emerging market," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    2. Luo, Yan & Zhang, Chenyang, 2020. "Economic policy uncertainty and stock price crash risk," Research in International Business and Finance, Elsevier, vol. 51(C).
    3. Chen, Yunsen & Xie, Yuan & You, Hong & Zhang, Yanan, 2018. "Does crackdown on corruption reduce stock price crash risk? Evidence from China," Journal of Corporate Finance, Elsevier, vol. 51(C), pages 125-141.
    4. Chen, Yangyang & Fan, Qingliang & Yang, Xin & Zolotoy, Leon, 2021. "CEO early-life disaster experience and stock price crash risk," Journal of Corporate Finance, Elsevier, vol. 68(C).
    5. Kim, Jeong-Bon & Tseng, Kevin & Wang, Jundong (Jeff) & Xi, Yaoyi, 2024. "Policy uncertainty, bad news disclosure, and stock price crash risk," Journal of Empirical Finance, Elsevier, vol. 78(C).
    6. Kim, Jeong-Bon & Liao, Shushu & Liu, Yangke, 2021. "Married CEOs and Stock Price Crash Risk," QBS Working Paper Series 2021/09, Queen's University Belfast, Queen's Business School.
    7. Mostafa Monzur Hasan & Grantley Taylor & Grant Richardson, 2022. "Brand Capital and Stock Price Crash Risk," Management Science, INFORMS, vol. 68(10), pages 7221-7247, October.
    8. Choi, Sanghak & Chun, Hongmin, 2025. "CEO’s early-life war-experience and corporate philanthropic donation: Evidence from the Korean War," Journal of Behavioral and Experimental Finance, Elsevier, vol. 46(C).
    9. Leilei Gu & Jinyu Liu & Yuchao Peng, 2022. "Locality Stereotype, CEO Trustworthiness and Stock Price Crash Risk: Evidence from China," Journal of Business Ethics, Springer, vol. 175(4), pages 773-797, February.
    10. Jinyu Liu & Rui Zhong, 2018. "Equity index futures trading and stock price crash risk: Evidence from Chinese markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(11), pages 1313-1333, November.
    11. Li, Qingyuan & Li, Si & Xu, Li, 2018. "National elections and tail risk: International evidence," Journal of Banking & Finance, Elsevier, vol. 88(C), pages 113-128.
    12. Ji, Qiong & Quan, Xiaofeng & Yin, Hongying & Yuan, Qingbo, 2021. "Gambling preferences and stock price crash risk: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 128(C).
    13. Kim, Hyeong Joon, 2025. "Lesson from stock price crash: Changes in managerial confidence and incentives," The British Accounting Review, Elsevier, vol. 57(3).
    14. Hou, Canran & Liu, Huan, 2023. "Institutional cross-ownership and stock price crash risk," Research in International Business and Finance, Elsevier, vol. 65(C).
    15. Cho, Seunghyun & Pae, Jinhan & Yoo, Choong-Yuel, 2025. "CEO war trauma and corporate tax avoidance," International Review of Financial Analysis, Elsevier, vol. 104(PA).
    16. Feng He & Yaqian Feng & Lingbing Feng, 2023. "Social media information dissemination and corporate bad news hoarding," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S1), pages 1503-1532, April.
    17. Chowdhury, Hasibul & Hodgson, Allan & Pathan, Shams, 2020. "Do external labour market incentives constrain bad news hoarding? The CEO's industry tournament and crash risk reduction," Journal of Corporate Finance, Elsevier, vol. 65(C).
    18. Gang Chu & Xiao Li & Dehua Shen & Yongjie Zhang, 2021. "Stock Crashes and Jumps Reactions to Information Demand and Supply: An Intraday Analysis," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 28(3), pages 397-427, September.
    19. Makrychoriti, Panagiota & Pyrgiotakis, Emmanouil G., 2024. "Firm-level political risk and stock price crashes," Journal of Financial Stability, Elsevier, vol. 74(C).
    20. Chang, Xin & Cheng, Louis T.W. & Kwok, Wing Chun & Wong, George, 2024. "Stock price crash risk and firms’ operating leverage," Journal of Financial Stability, Elsevier, vol. 71(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:255:y:2025:i:c:s0165176525003970. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.