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CEO Social Status and Risk-Taking

Joshua Shemesh

University of Melbourne - Department of Finance; Financial Research Network (FIRN)

August 15, 2016

I examine whether changes in CEO status affect risk-related business decisions. I use prestigious awards as shocks to CEO status relative to other CEOs. Firms with award-winning CEOs decrease their idiosyncratic volatility, and their industry betas converge towards one. These firms also reduce their spending on research and development, while increasing investment in fixed assets relative to a matched sample of firms with non-winning CEOs. The evidence suggests that CEOs who reach higher status become more concerned about poor relative performance. By conforming to other firms in their industry, CEOs with the highest reputation can lock-in their relative advantage.

Number of Pages in PDF File: 41

Keywords: Managerial Risk Taking, Relative Concerns, Reputation

JEL Classification: G30, G32

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Date posted: September 26, 2010 ; Last revised: September 25, 2016

Suggested Citation

Shemesh, Joshua, CEO Social Status and Risk-Taking (August 15, 2016). Available at SSRN: https://ssrn.com/abstract=1682625 or http://dx.doi.org/10.2139/ssrn.1682625

Contact Information

Joshua Shemesh (Contact Author)
University of Melbourne - Department of Finance ( email )
Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
HOME PAGE: http://www.firn.org.au

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