Working Paper: NBER ID: w17904
Authors: Nikolai Roussanov; Pavel G. Savor
Abstract: Status concerns can drive risk-taking behavior by affecting the payoff to a marginal dollar of wealth. If status concerns arise endogenously due to competition in the marriage market, then unmarried individuals should take greater risks. We test this hypothesis by studying corporate CEOs. We find that single CEOs are associated with firms exhibiting higher stock return volatility, pursue more aggressive investment policies, and are not affected by increases in idiosyncratic risk. These effects are weaker for older CEOs. Our results also hold when we use variation in divorce laws across states to instrument for CEO marital status.
Keywords: CEO; marital status; risk-taking behavior; status concerns
JEL Codes: D92; G02; G32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| CEO marital status (M12) | corporate risk-taking (G32) |
| single CEOs (M12) | stock return volatility (G17) |
| single CEOs (M12) | aggressive investment policies (G11) |
| CEO marital status (M12) | idiosyncratic risk (D81) |
| CEO age (M12) | effect of marital status on risk-taking (J12) |