The Influence of CEO Risk Taking on the Probability of their Turnover in American Companies

Student: Shavrina Yulia

Educational Programme: Economics (Bachelor)

Final Grade: 8

Year of Graduation: 2018

In this paper there is examined the influence of the individual risk of the CEO on the probability of his dismissal on the set of large american public companies. The total sample includes 279 companies from various industries, except banking, for the period from 2001 to 2018. The total set consists of 724 dismissals and 5022 observations. Given the lack of literature about measure of the risk appetite of the CEO, a new methodology was proposed in order to estimate it with help of an indicator based on data about CEO cash compensation and ownership of shares of the company by the CEO. In addition, the influence of individual characteristics of the CEO (age, tenure, education), indicators of the company's activity and its investment activity were studied there. As a result of the regression analysis, the majority of hypotheses was confirmed, for example, the positive impact of risk appetite, size and investment acrivity of the company and the negative impact of the age of risky CEOS on the probability of CEO dismissal. Moreover, the negative effect of binary variable chairman duality on the probability of CEO turnover was found. What is more, risk-seeking CEOs with a PhD degree or an MBA degree are less likely will be replaced.

Full text (added May 7, 2018)

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