The Influence of Managerial Risk-Taking and Corporate Leadership on Firm Sustainability

Steve Swidler ()
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Steve Swidler: Department of Economics, Lafayette College, Easton, PA 18042, USA

JRFM, 2025, vol. 18, issue 11, 1-20

Abstract: This study examines whether CEO risk tolerance influences a firm’s sustainable practices, as measured by Environmental, Social, and Governance (ESG) scores. The analysis uses facial width–height ratio (fWHR) as a proxy for CEO testosterone and risk-taking behavior. A regression analysis of S&P 500 firms from 2018 to 2022 shows that a greater fWHR is negatively associated with ESG scores, although the economic effect is small. A one standard deviation increase in fWHR decreases ESG by half a point on a 100-point scale. Further investigation into CEO turnover reveals a surprising asymmetry: when a new CEO has a higher fWHR, ESG scores increase significantly compared to firms without a CEO change. This finding, along with other confounding effects, suggests that a certain amount of calculated, strategic risk-taking may be necessary to successfully promote corporate sustainability programs.

Keywords: managerial risk taking; upper echelons theory; sustainability; ESG (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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