CEO Mobility and Corporate Policy Risk
91 Pages Posted: 2 Aug 2021
Date Written: July 27, 2021
Abstract
Career concerns can limit a manager’s willingness to take risks, which can lead to excessive policy conservatism. An increase in a CEO’s ability and willingness to change jobs (CEO mobility) can diversify her human capital and reduce her conservatism. We derive several CEO mobility measures and relate them to a policy riskiness index that captures the overall risk embedded in a firm’s corporate policies. We find a strong positive relation between CEO mobility and the riskiness of corporate policies. We also link external regulatory shocks that constrain labor mobility to significant drops in corporate risk-taking.
Keywords: CEO mobility, corporate policy risk, shareholder value, severance packages
JEL Classification: G31, G32, J33, J60, J62
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