CEO Private Firm Experience and Idiosyncratic Risk

64 Pages Posted: 19 Jan 2021 Last revised: 10 Jan 2022

See all articles by Dev R. Mishra

Dev R. Mishra

University of Saskatchewan - Edwards School of Business

Date Written: December 11, 2021

Abstract

I find that the idiosyncratic risk of public firms increases with the extent of CEO work experience in privately owned firms (CEO private experience). While there is no evidence of higher investment risk-taking by private CEOs, the proportion of private-firm work experience has a positive association with disclosure deficiency, a decrease in manager-owner agency conflicts, and an increase in political risk revelations at earnings conference calls, which in turn are associated with the elevation of idiosyncratic risk. Past private-firm work experience may play an important role in forming private CEOs’ style, which likely results in suboptimal disclosure, lower takeover defenses and increased blockholder dominance, and poor political risk treatment practices at the public firms they manage evidently exacerbating idiosyncratic risk.

Keywords: CEO Private Experience; Employment Experience; Idiosyncratic Risk; Investments; Political Risk, Corporate Social Responsibility

JEL Classification: G3, M1, Z

Suggested Citation

Mishra, Dev R., CEO Private Firm Experience and Idiosyncratic Risk (December 11, 2021). Available at SSRN: https://ssrn.com/abstract=3720156 or http://dx.doi.org/10.2139/ssrn.3720156

Dev R. Mishra (Contact Author)

University of Saskatchewan - Edwards School of Business ( email )

Edwards School of Business
Saskatoon, Saskatchewan S7N 5A7
Canada
306-966-8457 (Phone)
306-966-2515 (Fax)

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