Life is Too Short? Bereaved Managers and Investment Decisions

61 Pages Posted: 12 Sep 2015 Last revised: 30 Aug 2021

See all articles by Clark Liu

Clark Liu

Tsinghua University - PBC School of Finance

Tao Shu

The Chinese University of Hong Kong, Shenzhen; Shenzhen Finance Institute

Johan Sulaeman

National University of Singapore (NUS) - Department of Finance

P. Eric Yeung

Cornell University - Samuel Curtis Johnson Graduate School of Management

Date Written: August 26, 2021

Abstract

We examine whether bereavement affects managerial investment decisions in large organizations using the exogenous events of managers’ family deaths. We find evidence that bereaved managers take less risk in separate samples of mutual funds and publicly traded firms. 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 and fewer acquisitions after bereavement events. Further analyses support the emotion-driven explanation over other explanations. The risk-shifting by bereaved managers has negative implications on the performance of funds and firms that they manage.

Keywords: Life Experience, Bereavement, Investment Decisions, Mutual Fund, Public Firms, Risk Taking, Endogenous Matching

JEL Classification: G12, G31, G20

Suggested Citation

Liu, Clark and Shu, Tao and Sulaeman, Johan and Yeung, P. Eric, Life is Too Short? Bereaved Managers and Investment Decisions (August 26, 2021). Proceedings of Paris December 2019 Finance Meeting EUROFIDAI - ESSEC, 27th Annual Conference on Financial Economics and Accounting Paper, Available at SSRN: https://ssrn.com/abstract=2658815 or http://dx.doi.org/10.2139/ssrn.2658815

Clark Liu

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

Tao Shu

The Chinese University of Hong Kong, Shenzhen ( email )

Shenzhen Finance Institute ( email )

Johan Sulaeman (Contact Author)

National University of Singapore (NUS) - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HOME PAGE: http://sites.google.com/site/johansulaeman/

P. Eric Yeung

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

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