Latest Seminars

CEO Career Variety and Firm Risk Management

Prior literature has shown that CEOs with a more varied prior career engage in greater levels of risk taking, but it remains less understood whether such CEOs are also able to successfully manage the greater levels of risk they engage in. We address this gap and explore how the prior career variety of a CEO shapes the CEO’s capacity to successfully manage risk. Making use of microdata on CEOs and firms, we find that CEOs with a greater career variety, in terms of the number of industries, firms, and functional positions they have worked in, achieve a lower variability of firm performance (adjusted for the risk they take) and a higher firm performance (adjusted for the risk they take) than their counterparts with a more specialized prior career. Our additional analysis suggests that this effect is driven, at least in part, by the CEO’s greater knowledge of risk management best practices and greater cognitive awareness of risk considerations which the CEO has built during a more varied prior career. Interestingly, the benefits of a CEO’s greater prior career variety on the CEO’s capacity to successfully manage risk weaken as the tenure of the CEO in the focal firm increases. Taken together, our results suggest that greater CEO career variety is an important factor contributing to a CEO’s capacity to successfully manage risk in firms. Overall, we contribute to the literature on how characteristics of the careers of top managers shape firmlevel outcomes and to the literature on risk in strategy.

 

Speaker :
Prof. Philipp Meyer-Doyle, INSEAD
Venue :
LSK Rm5047 (Lift 1-2)
Date :
22.03.2019
Time :
10:30am-12:00pm