The Effect of CEO Characteristics on Risk Taking in Family Firms

Student: Bitepazh Ekaterina

Educational Programme: Strategic Corporate Finance (Master)

Year of Graduation: 2021

The study elaborates on the question how CEO characteristics affect risk taking in family firms. The sample includes 172 Italian private manufacturers of wearing apparel and leather. To alleviate the issue of potential endogeneity of one of regressor, a 2SLS estimator was used. The results indicate that, contrary to expectations, risk taking, as measured by volatility of return and cash flow, is higher when the CEO is a member of controlling family. However, the effect is mitigated by the number of years an individual has served in the position. CEO age is also found to negatively affect risk taking, whereas no significant gender effect is observed.

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