Professor Kelvin Yeung, from the Department of
Accountancy, along with co-authors, has investigated
the effect of managers on systematic risk. Tracking
the movement of top managers across firms, they 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. The early
career experiences of managers 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, the results suggest that managers play
an important role in shaping a firm's systematic risk.
Schoar, Antoinette; Yeung, Kelvin; Zuo, Luo. "The
Effect of Managers on Systematic Risk." February
2024; In: Management Science, Vol 70, Issue 2, pp
671-1342
Reference:
https://pubsonline.informs.org/doi/10.1287/mnsc.2023.4710
