Marriage and Managers’ Attitudes to Risk
Nikolai L. Roussanov
University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)
Pavel G. Savor
Temple University - Fox School of Business
December 14, 2013
AFA 2013 San Diego Meetings Paper
Marital status can both reflect and affect individual preferences. We explore the impact of marriage on corporate 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.
Keywords: CEOs, idiosyncratic risk, status concerns
JEL Classification: G02, G30, G32, J12, K36
Date posted: March 21, 2011 ; Last revised: April 21, 2014
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