The spouse effect and CEO risk‐taking

• Published date: 01 January 2024
• Author: Qianqian Du,Valerie Li,Lin Wang
• Date: 01 January 2024
• DOI: http://doi.org/10.1002/jcaf.22655

Received:  May  Revised:  August  Accepted:  September 

DOI: ./jcaf.

RESEARCH ARTICLE

The spouse effect and CEO risk-taking

Qianqian Du1Valerie Li2Lin Wang2

University of Victoria, Victoria, Canada

San Diego State University, San Diego,

USA

Correspondence

Valerie Li, San Diego State University,

 Campanile Dr., San Diego,CA ,

USA.

Email: vli@sdsu.edu

Abstract

We examine how a CEO’s family life affects their corporate decisions. Specif-

ically, we investigate whether a CEO’s spouse’s professional status affects the

CEO’s risk-taking behavior. Using a sample of S&P  firms from the 

to  period, we find evidence that CEOs with spouses who are profession-

als, defined as working spouses, spouses holding graduate degrees, or spouses

graduated from Ivy League schools, tend to adopt riskier corporate policies.

Our evidence suggests that firms led by CEOs with professional spouses exhibit

higher accounting return volatility, make more aggressive financial reporting

decisions, and invest more in risky assets. We do not find a significant associa-

tion between professional spouses and firms’ market return volatility.Our results

are consistent with the indirect channel theory, which suggests that CEOs with

professional spouses might be inclined to undertake higher risks, potentially

stemming from heightened conflicts between family and work commitments

or improved wealth diversification attributed to their spouses’ professional

standing.

KEYWORDS

CEO spouse, CEOs, family, risk-taking

1 INTRODUCTION

A growing literature documents that CEOs’ personal char-

acteristics affect various corporate activities, including

corporate investment policies (e.g., Bertrand & Schoar,

), corporate risk-taking behavior (Cain & Mckeon,

), and financial reporting policies (Davidson et al.,

). However, most of these studies focus on how CEOs’

personal attributes affect corporate policies. Few studies

investigate whether CEO family members influence cor-

porate decisions,although research in sociology suggests

that work and family influence each other (Crouter, ).

In this study, wedig deeper into the more general question

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provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.

©  The Authors. Journal of CorporateAccounting & Finance published by Wiley Periodicals LLC.

of how a CEO’s family environment affects corporatepoli-

cies by investigating the effects of CEOspouses on business

strategies. Specifically, we investigate the effect of CEO

spouses’ professional status on CEOs’ risk-taking behavior.

CEO risk preference can have a significant effect on

firms’ operations. CEOs’ attitude toward risks drives cor-

porate investment and other important financial decisions

(i.e., financial reporting choices). Studies exploring the

relationship between CEOs’ marital status and corporate

risk-taking show mixed results. Nicolosi and Yore ()

find that corporate deal-making activities and overall firm

riskiness increase when CEOs’ personal lives undergo

restructuring events such as getting married or divorced.

166 wileyonlinelibrary.com/journal/jcaf JCorp Account Finance. ;:–.