The Effect of Managers on Systematic Risk

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

1 Scopus Citations
View graph of relations

Author(s)

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)815–833
Number of pages19
Journal / PublicationManagement Science
Volume70
Issue number2
Online published21 Feb 2023
Publication statusPublished - Feb 2024

Abstract

Tracking the movement of top managers across firms, we document the importance of manager-specific fixed effects in explaining heterogeneity in firm exposures to systematic risk. In equilibrium, manager fixed effects on systematic risk are positively related with manager fixed effects on stock returns. These differences in systematic risk are partially explained by managers’ corporate strategies, such as their preferences for internal growth and financial conservatism. Managers’ early-career experiences of starting their first job in a recession also contribute to differential loadings on systematic risk. These effects are more pronounced when managers wield more influence, as in smaller firms and firms that do not have an independent board. Overall, our results suggest that managers play an important role in shaping a firm’s systematic risk.

Research Area(s)

  • manager fixed effects, systematic risk, managerial style

Bibliographic Note

Information for this record is supplemented by the author(s) concerned.

Citation Format(s)

The Effect of Managers on Systematic Risk. / Schoar, Antoinette; Yeung, Kelvin; Zuo, Luo.
In: Management Science, Vol. 70, No. 2, 02.2024, p. 815–833.

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review