Engineer CEOs and corporate risk taking

Sulochana Dissanayake, Ashesha Weerasinghe and Dilini Dissanayake

Journal of Accounting Literature, 2025, vol. 47, issue 5, 249-269

Abstract: Purpose - This study aims to examine whether engineer chief executive officers (CEOs) influence corporate risk-taking behaviour. We further examine the corporate characteristics that facilitate this association. Design/methodology/approach - We argue that engineer CEOs have unique skills and access to technical and/or technological social circles, increasing their self-confidence in decision-making. Using upper echelon and imprint theories, we hypothesise a positive association between engineer CEOs and corporate risk-taking. We hand-collected data of engineer CEOs in a sample of Australian listed firms from 2015 to 2022, and corporate risk-taking is measured based on stock return volatility and return on asset volatility over three overlapping years. The hypothesis is examined using regression analysis, followed by robustness tests. Findings - The analysis indicates a positive association between engineering CEOs and corporate risk-taking. The results are robust to fixed effect regressions, propensity score matching, accounting for residuals of the engineer CEO variable, and two-stage least squares (2SLS) methods. We traced sources of corporate risk-taking, finding that financial leverage and sales growth facilitate risky investments. Practical implications - The results present implications for the literature, corporate leaders, investors and regulators in understanding the role of CEOs’ technical expertise in determining corporate risk appetite. The results are insightful for stakeholders by revealing that engineer CEOs increase the corporate risk profile. Originality/value - This paper reveals that engineering CEOs increase corporate risk profiles, showing the importance of considering the specific expertise of leaders independently in understanding corporate risk-taking behaviour.

Keywords: Corporate strategy; CEO characteristics; Corporate risk taking; Engineering CEO; Organisational policies; D81; G32; G34; D23 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jalpps:jal-06-2024-0132

DOI: 10.1108/JAL-06-2024-0132

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