The Effect of Managers on Systematic Risk

Antoinette Schoar, Kelvin Yeung and Luo Zuo

No 27487, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Tracking the movement of top managers across firms, we 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. Managers’ early-career experiences of 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, our results suggest that managers play an important role in shaping a firm’s systematic risk.

JEL-codes: G12 G30 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-cfn, nep-fmk, nep-hrm, nep-rmg and nep-sbm
Note: AP CF
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Citations: View citations in EconPapers (1)

Published as Antoinette Schoar & Kelvin Yeung & Luo Zuo, 2024. "The Effect of Managers on Systematic Risk," Management Science, vol 70(2), pages 815-833.

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