Early-Life Experience and CEOs' Reactions to COVID-19

Abstract

This study investigates how CEOs’ experience of natural disasters and severe disease outbreaks in their formative years influences their firms’ responses to the COVID-19 pandemic in the United States. We observe that firms whose CEOs experienced disease outbreaks akin to COVID-19 early in their lives demonstrated more conservative responses to the emergence of the COVID-19 in late February 2020, notably through a substantial slowdown in capital expenditure growth. Moreover, firms led by CEOs with early-life disease experience exhibit a more negative tone in their corporate disclosures and heightened pessimism in their earnings forecasts following the COVID-19 outbreak. These effects are more pronounced for firms in industries that were hit hard by the pandemic. Our findings suggest that severe events early in life leave indelible imprints on memory, thereby impacting CEOs’ decision-making when managing similar crises in their professional careers.

Keywords: Early-Life Experience, Corporate Disclosure, Management Style, COVID-19

JEL Classification: G30, G31, G32, D83, M41, I10