Early-life Experience of Social Violence and CEOs’ Risk-taking Attitudes

Abstract

We examine the impact of early-life experiences of social violence on CEOs’ risk-taking attitudes, using the social violent events that CEOs experience as a child during the Chinese Cultural Revolution as a natural experiment. The evidence indicates that these CEOs engage in less acquisition activities, consistent with the notion that early violence experience fosters risk-aversion. We adopt multiple approaches to rule out alternative explanations and potential endogeneity, including using an instrument variable, a stringent set of fixed effcets, and falsification tests. Given that our treatment is distinct from the events in prior studies (e.g., natural disaster or economic degression), this study enriches our understanding on the origin of managerial risk-taking incentives.