The Impact of early-life Natural Disaster Experiences on the Corporate Innovation by CEOs

Chong Chen, Yongsi He, Kai Wang and Shuo Yan

Emerging Markets Finance and Trade, 2022, vol. 58, issue 14, 3953-3975

Abstract: We examine the relationship between CEO early-life natural disaster experience and corporate innovation. As China has a strict household registration system, we measure CEOs’ early-life natural disaster experience via defining CEOs’ birthplaces based on their official ID and linking it to the Chinese natural disaster database. We find that firms with CEOs who were exposed to natural disasters are less innovative. Importantly, we use textual analysis techniques to document two possible channels through which CEO natural disasters experience to stymie corporate innovation: CEO shortsightedness and risk-averse. Our results are robust to the instrumental variable approach, alternative definitions of early-life time windows and innovation, as well as difference-in-differences test based on CEO turnover events. Taken together, this study sheds light on the relationship between natural disasters and management’s myopia behavior.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:58:y:2022:i:14:p:3953-3975

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DOI: 10.1080/1540496X.2022.2073817

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