Status, Marriage, and Managers’ Attitudes to Risk (original) (raw)
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Marriage and Managers\\u27 Attitudes to Risk
2014
Marital status can both reflect and affect individual preferences. We explore the impact of marriage on corporate chief executive officers (CEOs) and find that firms run by single CEOs exhibit higher stock return volatility, pursue more aggressive investment policies, and do not respond to changes in idiosyncratic risk. These effects are weaker for older CEOs. Our findings continue to hold when we use variation in divorce laws across states to instrument for CEO marital status, which supports the hypothesis that marriage itself drives choices rather than it just reflecting innate heterogeneity in preferences. We explore various potential explanations for why single CEOs may be less risk averse. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.1926
We combine behavioral agency and family business literature to analyze the role of dominant firm principals in constraining the managerial agent's (CEO's) response to equitybased pay. Behavioral agency research has made progress in understanding CEO risk behavior in response to equity-based incentives and family firm risk behavior driven by concentrated socioemotional and financial firm-specific risk bearing. However, both literatures have evolved independently, which has limited our understanding of how the risk bearing of agent and principal influence the predictions of the behavioral agency model (BAM). We combine these literatures in order to enhance BAM's predictive validity with regard to firm risk-taking as a function of both agent and principal risk preferences. Our findings suggest that family principals are more likely than non-family principals to constrain CEO risk behavior that is perceived as immoderate (excessively risk-averse or excessively risk-seeking). We also offer evidence that CEO ties to the family influence the CEO's response to equity based incentives. In doing so, we offer refinements to BAM's formulation and advance our understanding of the unique nature of agency problems within family firms.
Portfolio choices, gender and marital status
We study the impact of gender and marital status on financial decisions using the 1989-2006 Bank of Italy Survey of Household Income and Wealth. Controlling for several characteristics of household financial heads, we find that male and married ones are more likely to invest in risky assets than female and single ones, respectively. We also investigate the role of background socioeconomic factors that capture regional differences in family structure and the organization of the labor market. Specifically, we find that higher divorce rates and female labor market participation rates are associated with a higher propensity to invest in risky assets. [JEL classification : G11, E21, J12, J21]
Age, Gender, and Risk-Taking: Evidence from the S&P 1500 Executives and Firm Riskiness
SSRN Electronic Journal, 2000
This paper examines whether the age and gender of the firm's top executives are reflected in firm-level riskiness. Using data on the S&P 1500 firms, we document that firms with older Chief Executive Officers (CEO) and Chief Financial Officers (CFO) are associated with less volatile stock returns and lower levels of idiosyncratic risk. This evidence suggests that executives become more risk averse with age and may constrain excessive risk-taking by their firms. Our findings on the effects of executive gender on firm riskiness are more ambiguous. Although we find a negative relationship between female CEOs and firm risk, the results also provide some evidence to suggest that firms with female CFOs may be more risky. We further document that female executives, on average, are younger than their male counterparts and therefore the effect of executive gender on firm risk is confounded by age-effects. Thus, it is important to control for both age and gender when considering the influence of top executives on firm riskiness. JEL classification: G01, G21, G30, G32
Journal of Business Finance & Accounting, 2021
This paper contributes to the literature by examining whether the age and gender of the firm's top executives influence market-based measures of firm risk. Using data on the S&P 1500 firms, we document that chief executive officer (CEO) and chief financial officer (CFO) age and gender have a direct effect on market-based firm risk measures in addition to the indirect influence they may have through corporate policy choices. Specifically, we find that firms led by older CEOs and CFOs have less volatile stock returns and lower idiosyncratic risk. Although the relationship between executive gender and firm risk is more equivocal, our results suggest that female-led firms are associated with lower levels of total and idiosyncratic risks after controlling for firmspecific attributes, policy choices, and managerial risk-taking incentives. We also document that CEO and CFO age and gender do not influence the level of systematic risk. Overall, our empirical findings demonstrate that the age and gender of the firm's top executives may have important implications for firm riskiness.
Over-investment in marriage-specific capital
Mathematical Social Sciences, 2014
We consider the decisions of a married couple in a risky environment. The distribution of spouses' bargaining power may change as a consequence of new outside opportunities that are o¤ered to them, so that individual consumption may ‡uctuate over time. This is what we call "bargaining risk". To reduce this risk, the spouses may decide to over-invest in marriage-speci…c capital (which, by de…nition, is completely lost in the case of divorce) and thereby limit the attractiveness of spouses'outside opportunities. This strategy is shown to be optimal. More suprisingly, over-investment in marriage-speci…c capital is still an optimal strategy when spouses are confronted to a (small) risk of divorce. This contrasts with the usual intuition.
How CEO Wealth Affects the Riskiness of a Firm
Applied Economics and Finance, 2019
The objective of this paper is to analyze the relationship between the ownership level of managers and the risk averse behavior of the firm. We measure the ownership level of the managers by the ratio of their ownership of the company relative to their total wealth for a sample of 69 individuals from the Forbes 400 list of the wealthiest individuals in the world for the period from 2001-11 using an unbalanced panel data analysis. The dependent variable is the Altman Z-score of each firm and we further test these relationships using financial leverage. The independent variables are delta and Vega of the option portfolio of the manager, R&D for the firm, total assets, the age of the manager, the tenure of the manager, stock holding of the manager, CEO/Chair duality of the manager and firma age. The Z-score is statistically significantly related to size, CEO age, CEO wealth, and duality. Financial leverage is not statistically significantly related to any of the independent variables.
Gender, Marriage, and Asset Accumulation in the United States
Feminist Economics, 2006
Wealth accumulation has important implications for the relative well-being of households. In this paper, we describe how household wealth in the United States varies by gender and family type. We find evidence of large differences in observed wealth between single-female-headed households and married couples. Although some of this gap reflects differences in observable characteristics correlated with gender and wealthsuch as position in the life cycle, education, and family earnings-controlling for these characteristics reduces but does not eliminate the estimated wealth gap. The wealth holdings of single females in the U.S., controlling for these same characteristics, are also significantly lower than the wealth holdings of single males in the U.S. In contrast, observed wealth gaps between genders in a sub-sample of young households disappear when controlling for observable characteristics, suggesting either that these gaps are disappearing for younger households or that these gaps do not emerge until later in life.