Life is Too Short? Bereaved Managers and Investment Decisions

70 Pages Posted: 12 Sep 2015 Last revised: 20 Nov 2019

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: May 1, 2019

Abstract

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

Liu, Clark and Shu, Tao and Sulaeman, Johan and Yeung, P. Eric, Life is Too Short? Bereaved Managers and Investment Decisions (May 1, 2019). 27th Annual Conference on Financial Economics and Accounting Paper; Proceedings of Paris December 2019 Finance Meeting EUROFIDAI - ESSEC. 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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