What Doesn't Kill You Will Only Make You More Risk-Loving: Early-Life Disasters and CEO Behavior

Gennaro Bernile, Vineet Bhagwat, P. Raghavendra Rau

Research output: Contribution to journalArticle

61 Citations (Scopus)

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.

Original languageEnglish (US)
Pages (from-to)167-206
Number of pages40
JournalJournal of Finance
Volume72
Issue number1
DOIs
StatePublished - Feb 1 2017
Externally publishedYes

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Disaster
Chief executive officer
Corporate policy
Leverage
Riskiness
Risk taking
Economic consequences
Firm risk
Cost of capital
Cash holdings

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

What Doesn't Kill You Will Only Make You More Risk-Loving : Early-Life Disasters and CEO Behavior. / Bernile, Gennaro; Bhagwat, Vineet; Rau, P. Raghavendra.

In: Journal of Finance, Vol. 72, No. 1, 01.02.2017, p. 167-206.

Research output: Contribution to journalArticle

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