Rookie Chinese directors and stock price crash risk

Purpose This study examines the influence of rookie directors on the risk of stock price crashes in Chinese listed firms. Design/methodology/approach Utilizing a panel dataset of Chinese A-share listed firms from 2012 to 2020, this study investigates the relationship between rookie directors and stock price crash risk through regression analysis. Additionally, the study examines how this relationship varies across different groups of firms, categorized based on the presence of seasoned directors, busy directors, and rehired directors. Findings The findings reveal that an increase in the number and proportion of rookie directors is significantly associated with heightened stock price crash risk. Importantly, seasoned directors, busy directors, and rehired directors partially mitigate the adverse effects of rookie directors on stock price crash risk due to their substantial board experience. Originality/value This study contributes to the literature in several ways. First, it establishes a link between rookie directors and elevated stock price crash risk, enriching the understanding of crash risk determinants and corporate governance. Second, it provides novel insights into how board tenure and accumulated expertise influence governance outcomes. Third, it highlights the mitigating role of experienced directors in alleviating the adverse effects of rookie directors, offering practical implications for corporate board formation and government policy-making.