Do unmarried CEO’s take bigger risks?
Relative wealth concerns can affect risk-taking behavior, as the payoff to a marginal dollar of wealth depends on the wealth of others. We develop a model where status concerns arise endogenously due to competition in the marriage market and lead to greater risk-taking for unmarried individuals. We evaluate empirically the importance of this effect in a high-stakes setting by studying corporate CEOs. We find that single CEOs, who are more likely to exhibit status concerns, are associated with firms that exhibit higher stock return volatility and pursue more aggressive investment policies. This effect is weaker for older CEOs. Our results hold both when we estimate the impact of marital status directly and when we use variation in divorce laws across U.S. states to instrument for CEO marital status.
Source: Roussanov, Nikolai L. and Savor, Pavel G., “Status, Marriage, and Managers’ Attitudes to Risk” (March 1, 2012).
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