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Marriage and Managers' Attitudes to Risk

Author

Listed:
  • Nikolai Roussanov

    (The Wharton School, University of Pennsylvania Philadelphia, Pennsylvania 19104; and National Bureau of Economic Research, Cambridge, Massachusetts 02138)

  • Pavel Savor

    (Fox School of Business, Temple University, Philadelphia, Pennsylvania 19122)

Abstract

Marital status can both reflect and affect individual preferences. We explore the impact of marriage on corporate chief executive officers (CEOs) and find that firms run by single CEOs exhibit higher stock return volatility, pursue more aggressive investment policies, and do not respond to changes in idiosyncratic risk. These effects are weaker for older CEOs. Our findings continue to hold when we use variation in divorce laws across states to instrument for CEO marital status, which supports the hypothesis that marriage itself drives choices rather than it just reflecting innate heterogeneity in preferences. We explore various potential explanations for why single CEOs may be less risk averse.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.1926 . This paper was accepted by Wei Jiang, finance .

Suggested Citation

  • Nikolai Roussanov & Pavel Savor, 2014. "Marriage and Managers' Attitudes to Risk," Management Science, INFORMS, vol. 60(10), pages 2496-2508, October.
    • Handle: RePEc:inm:ormnsc:v:60:y:2014:i:10:p:2496-2508
    DOI: 10.1287/mnsc.2014.1926
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    References listed on IDEAS

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