May Bad Luck Be Without You: The Effect of CEO Luck on Strategic Risk-Taking

University of Zurich, Institute of Business Administration, UZH Business Working Paper No. 393, 2022

42 Pages Posted: 22 Jun 2022 Last revised: 30 May 2024

See all articles by Pascal Flurin Meier

Pascal Flurin Meier

University of Zurich - Department of Business Administration (IBW)

Raphael Flepp

University of Zurich - Department of Business Administration (IBW)

David Oesch

University of Zurich

Date Written: May 28, 2024

Abstract

CEOs’ strategic actions are traditionally viewed as independent of luck because CEOs focus on skill-based capability cues. We draw on attribution theory to argue that CEOs often misattribute luck—perceiving good luck as high skill and bad luck as low skill—which impacts their strategic risk-taking. Contrary to notions of self-serving behavior, we theorize that CEOs react more strongly to bad luck, especially when they have prior negative experiences affecting their tendency for internal attribution of bad luck. By measuring luck as the exogenous component of recent firm performance, we find supporting evidence for our hypotheses, suggesting that luck has a meaningful and systematic effect on CEO behavior and thereby subsequent firm trajectories.

Keywords: Strategic Risk-Taking; Chief Executive Offers; Luck; Upper Echelons; Behavioral Strategy

JEL Classification: D22, D91, G30, M10, L20

Suggested Citation

Meier, Pascal Flurin and Flepp, Raphael and Oesch, David, May Bad Luck Be Without You: The Effect of CEO Luck on Strategic Risk-Taking (May 28, 2024). University of Zurich, Institute of Business Administration, UZH Business Working Paper No. 393, 2022, Available at SSRN: https://ssrn.com/abstract=4130318 or http://dx.doi.org/10.2139/ssrn.4130318

Pascal Flurin Meier (Contact Author)

University of Zurich - Department of Business Administration (IBW) ( email )

Plattenstrasse 14
Zurich, 8032
Switzerland

Raphael Flepp

University of Zurich - Department of Business Administration (IBW) ( email )

Plattenstrasse 14
Zurich, 8032
Switzerland

David Oesch

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

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