No abstract

The literature on managerial style posits a linear relation between a chief executive officer's (CEOs) past experiences and firm risk. We show that there is a nonmonotonic relation between the intensity of CEOs’ early‐life exposure to fatal disasters and corporate risk‐taking. CEOs who experience fatal disasters without extremely negative consequences lead firms that behave more aggressively, whereas CEOs who witness the extreme downside of disasters behave more conservatively. These patterns manifest across various corporate policies including leverage, cash holdings, and acquisition activity. Ultimately, the link between CEOs’ disaster experience and corporate policies has real economic consequences on firm riskiness and cost of capital.

The literature on managerial style posits a linear relation between a CEO's past experiences and firm risk. We show that there is a non-monotonic relation between the intensity of CEOs' earlylife exposure to fatal disasters and corporate risk-taking. CEOs who experience fatal disasters without extremely negative consequences lead firms that behave more aggressively, whereas CEOs who witness the extreme downside of disasters behave more conservatively. These patterns manifest across various corporate policies including leverage, cash holdings, and acquisition activity. Ultimately, the link between CEOs' disaster experience and corporate policies has real economic consequences on firm riskiness and cost of capital.

We develop a 10K-based measure of spatial variation in the availability of value-relevant information that reflects the multi-dimensional nature of firm location. Spatially distributed information generates locationbased information asymmetries that affect institutional portfolio decisions and performance. Institutions overweigh firms with greater local economic exposure and earn superior returns on corresponding trades, even for firms not headquartered locally. These patterns are stronger among harder-to-value stocks. Consistent with local informational advantage, local investor performance increases with the local exposure of individual stock holdings and her portfolio as a whole, and more so when her portfolio is more heavily tilted toward local stocks.

2016-11-03T14:11:40