'I Do': Does Marital Status Affect How Much CEOs 'Do'?

31 Pages Posted: 14 Jan 2015

See all articles by Gina Nicolosi

Gina Nicolosi

Northern Illinois University

Adam S. Yore

University of Missouri at Columbia - Department of Finance

Date Written: January 2015

Abstract

This paper explores whether a CEO's marital status reveals unobservable risk preferences which influence their firm's investment and compensation policies. Using biographical data for CEOs of large domestic companies, we find that corporate deal‐making activity (e.g., mergers, joint ventures, major capital expenditures, etc.) and overall firm riskiness both increase significantly with personal life restructuring (e.g., marriages and divorces). This relation is supported by an instrumental variables analysis and also an investigation surrounding CEO turnover. Finally, the link between a CEO's marital status and preference for option‐based compensation further suggests that personal restructuring may be an indicator of executive risk appetites.

Keywords: managerial biases, marriage, divorce, corporate deal‐making activities, managerial effort, firm risk, CEO stock options

JEL Classification: D22, G32, G34

Suggested Citation

Nicolosi, Gina and Yore, Adam S., 'I Do': Does Marital Status Affect How Much CEOs 'Do'? (January 2015). Financial Review, Vol. 50, Issue 1, pp. 57-88, 2015, Available at SSRN: https://ssrn.com/abstract=2549324 or http://dx.doi.org/10.1111/fire.12060

Gina Nicolosi (Contact Author)

Northern Illinois University ( email )

Department of Finance
Barsema Hall
DeKalb, IL 60115
United States
815-753-6391 (Phone)

Adam S. Yore

University of Missouri at Columbia - Department of Finance ( email )

403 Cornell Hall
Columbia, MO 65211
United States
573-884-1446 (Phone)

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