CEO Characteristics and Corporate Risk-Taking : Evidence From Emerging Markets

We show the effect of CEOs' characteristics on corporate risk-taking of a hand-collected sample of 369 Latin American listed firms from Argentina, Brazil, Chile, Colombia, Mexico, and Peru for the period 2005-2020. We study six traits: CEOs’ age, tenure, gender, duality (i.e., holding concurrent chairman and CEO roles), educational background, and career horizon, and find that age increases risk-taking. However, when the CEO’s age reaches a given point, their concern about reputation and retirement results in a negative relationship. We also find that as CEO tenure increases, corporate risk begins to decrease. Nevertheless, there comes a point at which the CEO uses their firm- and industry-specific knowledge as well as their overconfidence to make risky financial decisions. Female CEOs are seen to have a negative impact on risk-taking, while CEO duality, CEO educational background, foreign CEOs, and a CEO's career horizon have the opposite effect. Our study is novel because of the focus on an emerging market context and because of the use of several different market-based measures of risk-taking. From an empirical point of view, we provide policymakers, investors, and practitioners with fresh evidence about how CEOs' risk aversion shapes the firm’s risk-taking behaviour