CEO Mobility and Corporate Policy Risk

91 Pages Posted: 2 Aug 2021

See all articles by Gonul Colak

Gonul Colak

University of Sussex ; Hanken School of Economics

Timo Korkeamaki

Aalto University - Aalto University School of Business, Department of Finance, Students

Date Written: July 27, 2021

Abstract

Career concerns can limit a manager’s willingness to take risks, which can lead to excessive policy conservatism. An increase in a CEO’s ability and willingness to change jobs (CEO mobility) can diversify her human capital and reduce her conservatism. We derive several CEO mobility measures and relate them to a policy riskiness index that captures the overall risk embedded in a firm’s corporate policies. We find a strong positive relation between CEO mobility and the riskiness of corporate policies. We also link external regulatory shocks that constrain labor mobility to significant drops in corporate risk-taking.

Keywords: CEO mobility, corporate policy risk, shareholder value, severance packages

JEL Classification: G31, G32, J33, J60, J62

Suggested Citation

Colak, Gonul and Korkeamaki, Timo, CEO Mobility and Corporate Policy Risk (July 27, 2021). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3894419

Gonul Colak (Contact Author)

University of Sussex ( email )

Jubilee Building
Falmer
Brighton, BN1 9SN
United Kingdom

Hanken School of Economics ( email )

P.O. Box 479
Arkadiankatu 22
FI-00100 Helsinki, 00100
Finland

Timo Korkeamaki

Aalto University - Aalto University School of Business, Department of Finance, Students ( email )

Finland

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