The Effect of Managers on Systematic Risk
59 Pages Posted: 7 Jul 2020 Last revised: 13 Jul 2020
Date Written: July 10, 2020
Tracking the movement of top managers across firms, we document the importance of manager-specific fixed effects in explaining heterogeneity in firm exposures to systematic risk. These differences in systematic risk are partially explained by managers’ corporate strategies, such as their preferences for internal growth and financial conservatism. Managers’ early-career experiences of starting their first job in a recession also contribute to differential loadings on systematic risk. These effects are more pronounced for smaller firms. Overall, our results suggest that managerial styles have important implications for asset prices.
Keywords: Manager Fixed Effects; Systematic Risk; Managerial Style; Asset Prices
JEL Classification: G12; G30
Suggested Citation: Suggested Citation