CEO Personal Risk Taking and Corporate Policies
This study analyzes the relation between chief executive officer (CEO) personal risktaking, corporate risk taking, and total firm risk. We find evidence that CEOs who possess private pilot licenses (our proxy for personal risk taking) are associated with riskier firms. Firms led by pilot CEOs have higher equity return volatility, beyond the amount explained by compensation components that financially reward risk taking. We trace the source of the elevated firm risk to specific corporate policies, including leverage and acquisition activity. Our results suggest that nonpecuniary risk preferences revealed outside the scope of the firm have implications for project selection and various corporate policies.