CEO’s total wealth characteristics and implications on firm risk
(2018) In International Review of Finance 18(1). p.35-58- Abstract
- We study the connections between firm risk and the CEO’s personal wealth characteristics, using a unique dataset on CEO wealth and its components. Consistent with decreasing absolute risk aversion, we find that wealthier CEOs are associated with higher risk firms. Riskier firms tend to have CEOs whose wealth is more independent of the firm. We also find that CEOs with high personal portfolio betas run firms with higher betas. CEO’s tenure is negatively associated with firm risk measured either as beta, idiosynchratic risk, or volatility of accounting profitability. A possible interpretation is that risk-averse managers are better able to imprint their risk preferences on the firm over time. Stronger corporate governance weakens the... (More)
- We study the connections between firm risk and the CEO’s personal wealth characteristics, using a unique dataset on CEO wealth and its components. Consistent with decreasing absolute risk aversion, we find that wealthier CEOs are associated with higher risk firms. Riskier firms tend to have CEOs whose wealth is more independent of the firm. We also find that CEOs with high personal portfolio betas run firms with higher betas. CEO’s tenure is negatively associated with firm risk measured either as beta, idiosynchratic risk, or volatility of accounting profitability. A possible interpretation is that risk-averse managers are better able to imprint their risk preferences on the firm over time. Stronger corporate governance weakens the connection between CEO wealth characteristics and firm risk. (Less)
- Abstract (Swedish)
- We study the connections between firm risk and the CEO’s personal wealth characteristics, using a unique dataset on CEO wealth and its components. Consistent with decreasing absolute risk aversion, we find that wealthier CEOs are associated with higher risk firms. Riskier firms tend to have CEOs whose wealth is more independent of the firm. We also find that CEOs with high personal portfolio betas run firms with higher betas. CEO’s tenure is negatively associated with firm risk measured either as beta, idiosynchratic risk, or volatility of accounting profitability. A possible interpretation is that risk-averse managers are better able to imprint their risk preferences on the firm over time. Stronger corporate governance weakens the... (More)
- We study the connections between firm risk and the CEO’s personal wealth characteristics, using a unique dataset on CEO wealth and its components. Consistent with decreasing absolute risk aversion, we find that wealthier CEOs are associated with higher risk firms. Riskier firms tend to have CEOs whose wealth is more independent of the firm. We also find that CEOs with high personal portfolio betas run firms with higher betas. CEO’s tenure is negatively associated with firm risk measured either as beta, idiosynchratic risk, or volatility of accounting profitability. A possible interpretation is that risk-averse managers are better able to imprint their risk preferences on the firm over time. Stronger corporate governance weakens the connection between CEO wealth characteristics and firm risk. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/805bdb1f-a74e-4f72-ab14-ba846c89978f
- author
- Korkeamäki, Timo ; Liljeblom, Eva LU and Pasternack, Daniel
- organization
- alternative title
- CEO’s total wealth characteristics and implications on firm risk
- publishing date
- 2018-03
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- Ceo wealth, Firm risk, CEO wealth, firm risk
- in
- International Review of Finance
- volume
- 18
- issue
- 1
- pages
- 35 - 58
- publisher
- Wiley-Blackwell
- external identifiers
-
- scopus:85021441476
- ISSN
- 1468-2443
- DOI
- 10.1111/irfi.12139
- language
- English
- LU publication?
- yes
- id
- 805bdb1f-a74e-4f72-ab14-ba846c89978f
- date added to LUP
- 2017-05-15 15:03:00
- date last changed
- 2022-03-24 18:25:47
@article{805bdb1f-a74e-4f72-ab14-ba846c89978f, abstract = {{We study the connections between firm risk and the CEO’s personal wealth characteristics, using a unique dataset on CEO wealth and its components. Consistent with decreasing absolute risk aversion, we find that wealthier CEOs are associated with higher risk firms. Riskier firms tend to have CEOs whose wealth is more independent of the firm. We also find that CEOs with high personal portfolio betas run firms with higher betas. CEO’s tenure is negatively associated with firm risk measured either as beta, idiosynchratic risk, or volatility of accounting profitability. A possible interpretation is that risk-averse managers are better able to imprint their risk preferences on the firm over time. Stronger corporate governance weakens the connection between CEO wealth characteristics and firm risk.}}, author = {{Korkeamäki, Timo and Liljeblom, Eva and Pasternack, Daniel}}, issn = {{1468-2443}}, keywords = {{Ceo wealth; Firm risk; CEO wealth; firm risk}}, language = {{eng}}, number = {{1}}, pages = {{35--58}}, publisher = {{Wiley-Blackwell}}, series = {{International Review of Finance}}, title = {{CEO’s total wealth characteristics and implications on firm risk}}, url = {{http://dx.doi.org/10.1111/irfi.12139}}, doi = {{10.1111/irfi.12139}}, volume = {{18}}, year = {{2018}}, }