CEO's who fly, take riskier M&A bets
13 August 2011
A high-flying CEO sitting in the cockpit and flying his own aircraft will in all probability be equally adept in the boardroom, piloting aggressive acquisitions and mergers and taking his company to stellar heights
A high-flying CEO sitting in the cockpit and flying his own aircraft will in all probability be equally adept in the boardroom, piloting aggressive acquisitions and mergers and taking his company to stellar heights.
Two American professors have just come out with a study that indicates that CEO-pilots exhibit the same adventurous spirit while steering their corporates by adopting bold new management strategies.
"The desire to fly is indicative of a genetic personality trait known as sensation seeking, which is associated with risk-taking behaviour," Matthew D. Cain of the Mendoza College of Business, University of Notre Dame, and Stephen B. McKeon, Lundquist College of Business, University of Oregon, say in their study analysing the relation between CEO personal risk-taking, corporate policies, and overall firm risk.
"Our evidence suggests that a genetic predisposition towards personal risk-taking extends to the executive suite and impacts corporate decision making.
Risk-taking CEOs are associated with higher firm leverage, more frequent acquisitions, and greater stock return volatility, say the authors of the study, Cleared for takeoff? : CEO personal risk-taking and corporate policies.
In contrast to overconfident CEOs, risk-taking ones who manage high book-to-market firms are associated with value increasing acquisitions.