Photo: sean dreilinger via flickr
Single executives take bigger risks than married ones, and this has major implications for companies across America.In a report by the National Bureau of Economic Research, Status, Marriage and Managers’ Attitudes Towards Risk, authors Nikolai Roussanov and Pavel G. savour looked at CEOs from 1993 – 2008, and compared marital status to risk-taking behaviour (via Fortune).
According to the report, single CEOs pursue more aggressive investment strategies and put more money into R&D, which is associated with risk-taking:
Return volatility of single CEO firms is 24% higher. … [and] investment is 69% higher for such firms relative to those run by married CEOs.
Some of this has to do with the fact that younger, single CEOs are more likely to run younger companies and tech start-ups, which will inherently encounter more risk. But according to the authors, a lot of this risk-taking has to do with finding a mate:
Overwhelming evidence exists that wealth and socioeconomic status are positively related to men’s reproductive success. Both experimental and survey evidence indicates that mating concerns induce signaling of wealth through conspicuous consumption and financial risk-taking. …
CEOs represent the upper tail of the wealth distribution, where status concerns are likely to be most acute. … Status concerns are important for financial decisions, and lead individuals to assume more risk. These findings have potentially rich implications in both corporate finance and asset pricing.
Of course there will always be exceptions to the rule, and industry culture also plays a major role in a CEO’s tendency toward risk-taking.
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