Publication Type

Journal Article

Publication Date

2-2017

Abstract

The literature on managerial style posits a linear relation between a chief executive officer's (CEOs) past experiences and firm risk. We show that there is a nonmonotonic relation between the intensity of CEOs’ early-life exposure to fatal disasters and corporate risk-taking. CEOs who experience fatal disasters without extremely negative consequences lead firms that behave more aggressively, whereas CEOs who witness the extreme downside of disasters behave more conservatively. These patterns manifest across various corporate policies including leverage, cash holdings, and acquisition activity. Ultimately, the link between CEOs’ disaster experience and corporate policies has real economic consequences on firm riskiness and cost of capital.

Keywords

CEO Formative Experiences, CEO Behavior, Risk-taking, Managerial Style

Discipline

Business | Corporate Finance | Human Resources Management | Strategic Management Policy

Research Areas

Finance

Publication

Journal of Finance

Volume

72

Issue

1

First Page

167

Last Page

206

ISSN

0022-1082

Identifier

10.1111/jofi.12432

Publisher

Wiley

Copyright Owner and License

Authors

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.1111/jofi.12432

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