It Takes Two to Tango: Spousal Risk Preferences and CEO Risk-Taking Behavior

Abstract

This paper examines whether spouses of CEOs influence corporate decisions. Using hand-collected data on the cultural origins of CEOs and their spouses, we measure within-marriage differences in risk aversion attributable to CEO-spouse cultural differences. Focusing on risk-taking behavior of S&P 500 CEOs, we show that spousal risk preferences influence CEOs' attitudes toward uncertainty and corporate risk-taking. CEOs with more risk averse spouses adopt relatively safer corporate policies, especially if those CEOs come from less individualistic cultures. Together, these findings suggest that cultural composition of CEO households and spousal risk preferences affect corporate behavior. ABSTRACT This paper examines whether spouses of CEOs influence corporate decisions. Using hand-collected data on the cultural origins of CEOs and their spouses, we measure within-marriage differences in risk aversion attributable to CEO-spouse cultural differences. Focusing on risk-taking behavior of S&P 500 CEOs, we show that spousal risk preferences influence CEOs' attitudes toward uncertainty and corporate risk-taking. CEOs with more risk averse spouses adopt relatively safer corporate policies, especially if those CEOs come from less individualistic cultures. Together, these findings suggest that cultural composition of CEO households and spousal risk preferences affect corporate behavior.