CEOs With a Financial Background and Corporate Risk-Taking

Abstract

This study assesses the effect of CEOs' financial background characteristics on corporate risk-taking. Although previous studies have extensively examined how CEOs' financial background characteristics influence firm behavior, few have focused on their effects on corporate risk-taking. Using a sample of 26,084 firm-year observations of 3468 listed firms in China between 2008 and 2020, we examine whether CEOs' background characteristics, particularly having a financial background, affect corporate risk-taking. We find that a CEO with a financial background tends to adopt higher levels of corporate risk-taking. Moreover, our findings suggest that these CEOs increase corporate risk-taking by alleviating financing constraints, fostering the integration of industrial and financial capital, and promoting the financialization of enterprises. Overall, our findings contribute to the literature on the relationship between executives' financial backgrounds and corporate risk-taking by offering insights from the perspective of CEOs' experience. These results have important implications for firms in terms of executive selection, management team optimization, and fostering greater integration between industry and finance.