CEO Tenure and Risk-Taking
Global Business and Finance Review, 2014, vol. 19, issue 1, p1-27
26 Pages Posted: 10 Apr 2012 Last revised: 11 Aug 2014
Date Written: August 10, 2014
This paper conducts a systematic analysis of the effect of CEO tenure on risk-taking. We document an overall positive relation between tenure and risk-taking. The results are inconsistent with viewing tenure primarily as an indicator of human capital investment. Though we can not rule out the explanations based on the power and experience effects of tenure, our results are more consistent with interpreting tenure as the career concerns of a manager. Consistent with this interpretation and recent theoretical work, we show that the effect of CEO tenure on risk-taking depends on the information asymmetry about CEO ability.
Keywords: Corporate Governance, CEO Tenure, Risk Taking, Pay-Performance Sensitivity, Pay-Volatility Sensitivity, Career Concern, Managerial Power, Entrenchment, Experience, Human Capital Investment
JEL Classification: G30, G34
Suggested Citation: Suggested Citation