How Early Trauma Shapes CEO Risk Appetite for Debt

35 Pages Posted: 30 Mar 2024

See all articles by Yiwei Li

Yiwei Li

University of Essex, EBS

Wei Song

University of Nottingham

Thanos Verousis

Vlerick Business School

Haolan Yang

University of Essex

Abstract

This study examines the impact of CEOs’ early disaster experiences on their choice of debt structure. We find that firms led by CEOs who have endured disasters are more inclined to shift from bank debt to public debt. This evidence remains robust across various alternative measures, empirical specifications, and identification tests aimed at mitigating endogeneity. The effect of CEOs’ early disaster experiences is more pronounced when regulatory oversight is stricter, unemployment risk is lower, and financial distress risk is higher. Overall, these findings suggest that the CEOs' inclination, shaped by early disasters, to take additional risk and seek greater autonomy, can have significant effects on corporate debt structure.

Keywords: Chief executive officers, Early-life disaster experience, imprinting, corporate debt structure.

Suggested Citation

Li, Yiwei and Song, Wei and Verousis, Thanos and Yang, Haolan, How Early Trauma Shapes CEO Risk Appetite for Debt. Available at SSRN: https://ssrn.com/abstract=4779058 or http://dx.doi.org/10.2139/ssrn.4779058

Yiwei Li (Contact Author)

University of Essex, EBS ( email )

University of Essex Wivenhoe Park
Essex business school
Colchester, CO4 3SQ
United Kingdom

Wei Song

University of Nottingham ( email )

Thanos Verousis

Vlerick Business School ( email )

Library
REEP 1
Gent, BE-9000
Belgium

Haolan Yang

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

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