CEO Traits and Firm Outcomes: Do Early Childhood Experiences Matter?

Abstract

This paper examines the impact of early childhood characteristics of top corporate decision makers on firm policies and value. Using a unique dataset, we study the effect of CEO birth order, family size, socioeconomic status, parent occupational choices and childhood trauma, all of which have been shown to affect personality development and social capital. Overall, we find that firstborn CEOs, CEOs from families with higher socioeconomic resources and those with less childhood trauma prefer safer investment and leverage policies, which also lead to lower firm value. Socioeconomic status dominates other childhood characteristics as a determinant of firm policies. Though our analyses indicate a moderate effect of birth order, it intensifies in CEO family owned firms where family dynamics facilitate expression of personal risk taking.

Keywords: CEO Characteristics, risk preferences, social class