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Do Managerial Motives Influence Firm Risk Reduction Strategies?
Author(s) -
MAY DON O.
Publication year - 1995
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1995.tb04059.x
Subject(s) - affect (linguistics) , business , equity (law) , business risks , marketing , psychology , risk analysis (engineering) , communication , political science , law
This article finds evidence consistent with the hypothesis that managers consider personal risk when making decisions that affect firm risk. I find that Chief Executive Officers (CEOs) with more personal wealth vested in firm equity tend to diversify. CEOs who are specialists at the existing technology tend to buy similar technologies. When specialists have many years vested, they tend to diversify, however. Poor performance in the existing lines of business is associated with movements into new lines of business.