Life is Too Short? Bereaved Managers and Investment Decisions
70 Pages Posted: 12 Sep 2015 Last revised: 20 Nov 2019
Date Written: May 1, 2019
We examine whether bereavement affects managerial investment decisions using the exogenous events of deaths in the family. Consistent with bereavement inducing higher risk-aversion, we find in separate samples of mutual funds and publicly traded firms that bereaved managers take less risk. Mutual funds managed by bereaved managers exhibit smaller tracking errors, lower active share measures, and higher portfolio weights on larger stocks after bereavement events. Firms managed by bereaved CEOs exhibit lower capital expenditures, fewer acquisitions, and lower CEO ownerships after bereavement events. The risk-shifting by bereaved managers has negative implications on the performance of funds and firms they manage.
Keywords: Life Experience, Bereavement, Anxiety, Investment Decisions, Mutual Fund, Public Firms, Risk Taking, Endogenous Matching
JEL Classification: G12, G31, G20
Suggested Citation: Suggested Citation