CEO relative age at school entry and corporate risk-taking

Junru GUO; Jia HE; Sibo LIU; Yonglin WANG

doi:10.1016/j.jbankfin.2025.107457

CEO relative age at school entry and corporate risk-taking

Junru GUO, Jia HE^*, Sibo LIU, Yonglin WANG

^*Corresponding author for this work

Department of Economics

Research output: Journal Publications › Journal Article (refereed) › peer-review

Abstract

We investigate the effect of CEO relative age, an early-life measure defined as age relative to others in the same school cohort determined by the cutoff date policy at primary school entry, on corporate risk-taking. We base our analysis on the arguable randomness of managers’ birth months and a novel data set containing the birth month information of 2,595 CEOs from 1,011 Chinese listed firms. We find that firms with “relatively older” CEOs, i.e., those who were older than their classmates at school entry, compared with firms with “relatively younger” CEOs, have greater volatility in their profitability and stock returns, use debt financing more aggressively, engage in more diversifying and value-destroying acquisitions, and experience deteriorating performance. The results are robust to a battery of alternative specifications.

Original language	English
Article number	107457
Journal	Journal of Banking and Finance
Volume	176
Early online date	11 Apr 2025
DOIs	https://doi.org/10.1016/j.jbankfin.2025.107457
Publication status	E-pub ahead of print - 11 Apr 2025

Bibliographical note

We are grateful to the editor (Edith Hotchkiss) and the two anonymous reviewers for their suggestions. We also thank Marius Guenzel, Xiaoyu Zhu, Mengyao Dong, conference participants at 2024 AFA, 2023CFRI&CIRF, 2023 CEC for their helpful comments. Jia He thanks the National Natural Science Foundation of China for its financial support (No.72271130, No.72495155, No.72495150). Yonglin Wang thanks General Research Fund funded by Hong Kong RGC (No. 13502124), and Direct Grant funded by Lingnan University (No. DR23A1) for their financial support. Sibo Liu thanks General Research Fund funded by Hong Kong RGC (No. 12503324). Junru Guo thanks the financial support from the Fundamental Research Funds for the Central Universities (No.63252076).

Publisher Copyright:
© 2025 Elsevier B.V.

Funding

Jia He thanks the National Natural Science Foundation of China for its financial support (No. 72271130). Yonglin Wang thanks General Research Fund funded by Hong Kong RGC (Grant No. 13605120) and Direct Grant funded by Lingnan University (Grant No. DR23A1) for their financial support.

Keywords

CEO personality traits
Corporate risk-taking
Relative age effect

Access to Document

10.1016/j.jbankfin.2025.107457

https://linkinghub.elsevier.com/retrieve/pii/S0378426625000779

Cite this

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title = "CEO relative age at school entry and corporate risk-taking",

abstract = "We investigate the effect of CEO relative age, an early-life measure defined as age relative to others in the same school cohort determined by the cutoff date policy at primary school entry, on corporate risk-taking. We base our analysis on the arguable randomness of managers{\textquoteright} birth months and a novel data set containing the birth month information of 2,595 CEOs from 1,011 Chinese listed firms. We find that firms with “relatively older” CEOs, i.e., those who were older than their classmates at school entry, compared with firms with “relatively younger” CEOs, have greater volatility in their profitability and stock returns, use debt financing more aggressively, engage in more diversifying and value-destroying acquisitions, and experience deteriorating performance. The results are robust to a battery of alternative specifications.",

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note = "We are grateful to the editor (Edith Hotchkiss) and the two anonymous reviewers for their suggestions. We also thank Marius Guenzel, Xiaoyu Zhu, Mengyao Dong, conference participants at 2024 AFA, 2023CFRI&CIRF, 2023 CEC for their helpful comments. Jia He thanks the National Natural Science Foundation of China for its financial support (No.72271130, No.72495155, No.72495150). Yonglin Wang thanks General Research Fund funded by Hong Kong RGC (No. 13502124), and Direct Grant funded by Lingnan University (No. DR23A1) for their financial support. Sibo Liu thanks General Research Fund funded by Hong Kong RGC (No. 12503324). Junru Guo thanks the financial support from the Fundamental Research Funds for the Central Universities (No.63252076). Publisher Copyright: {\textcopyright} 2025 Elsevier B.V.",

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N2 - We investigate the effect of CEO relative age, an early-life measure defined as age relative to others in the same school cohort determined by the cutoff date policy at primary school entry, on corporate risk-taking. We base our analysis on the arguable randomness of managers’ birth months and a novel data set containing the birth month information of 2,595 CEOs from 1,011 Chinese listed firms. We find that firms with “relatively older” CEOs, i.e., those who were older than their classmates at school entry, compared with firms with “relatively younger” CEOs, have greater volatility in their profitability and stock returns, use debt financing more aggressively, engage in more diversifying and value-destroying acquisitions, and experience deteriorating performance. The results are robust to a battery of alternative specifications.

AB - We investigate the effect of CEO relative age, an early-life measure defined as age relative to others in the same school cohort determined by the cutoff date policy at primary school entry, on corporate risk-taking. We base our analysis on the arguable randomness of managers’ birth months and a novel data set containing the birth month information of 2,595 CEOs from 1,011 Chinese listed firms. We find that firms with “relatively older” CEOs, i.e., those who were older than their classmates at school entry, compared with firms with “relatively younger” CEOs, have greater volatility in their profitability and stock returns, use debt financing more aggressively, engage in more diversifying and value-destroying acquisitions, and experience deteriorating performance. The results are robust to a battery of alternative specifications.

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CEO relative age at school entry and corporate risk-taking

Abstract

Bibliographical note

Funding

Keywords

Access to Document

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CEO relative age at school entry and corporate risk-taking

Abstract

Bibliographical note

Funding

Keywords

Access to Document

Other files and links

Fingerprint

Projects

Consumption and Debt Response to Income Shocks: Evidence from Long-term Debt Run-offs

How Unaffordable is Hong Kong's Housing Market? (為何香港樓價如此難以負擔？)

Cite this