What doesn’t kill you will only make you more risk-loving: Early-life disasters and CEO behavior

Gennaro BERNILE, Singapore Management University
P. Raghavendra RAU


The extant literature on managerial style posits a linear relation between a CEO’s past experiences and corporate policy. We show that there is a non-monotonic relation between the intensity of CEOs’ early-life exposure to natural disasters and subsequent corporate risk-taking. CEOs who experienced natural disasters without extremely negative consequences appear to be desensitized to risk and lead firms that behave more aggressively. Conversely, CEOs who witnessed the extreme downside potential of natural disasters behave more conservatively when at the helm of a firm. These results hold across various corporate policies and outcomes including leverage, stock volatility, cash holdings, and acquisitiveness.