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CEO Relative Age and Corporate Risk-Taking

SSRN Electronic Journal
2022
  • 0
    Citations
  • 1,268
    Usage
  • 6
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Usage
    1,268
    • Abstract Views
      1,030
    • Downloads
      238
  • Captures
    6
  • Ratings
    • Download Rank
      257,516

Article Description

We investigate the effect of CEO relative age, an early-life measure defined as age relative to others in the same school cohort determined by the cutoff date policy at primary school entry, on corporate risk-taking. We base our analysis on the arguable randomness of managers’ birth months and a novel data set containing the birth month information of 2,595 CEOs from 1,011 Chinese listed firms. We find that firms with “relatively older” CEOs, i.e., those who were older than their classmates at school entry, compared with firms with “relatively younger” CEOs, have greater volatility in their profitability and stock returns, use debt financing more aggressively, engage in more diversifying and valuedestroying acquisitions, and experience deteriorating performance and higher crash risks. The results are robust to a battery of alternative specifications. Our additional tests suggest that the overconfidence of relatively older CEOs explains our findings.

Bibliographic Details

Junru Guo; Jia He; Sibo Liu; Yonglin Wang

Elsevier BV

relative age effect; risk-taking; CEO; overconfidence

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