Topic: The Cultural Origin of Preferences: CEO Cultural Heritage and Corporate Investment
Speaker: Stephan Siegel, Associate Professor, University of Washington
Date: November 12th, 2014 (Wed.)
Time: 2:00-3:30pm
Location: Building 1, Room 501 Faculty Lounge
Language: English
Abstract:
Does culture shape risk preferences? While economic models of the origins of preferences point to an important role of culture, i.e., the social transmission of preferences, supporting empirical evidence is largely missing for risk and time preferences. In this study, we exploit variation in cultural heritage across CEOs of public U.S. companies and demonstrate an important effect of CEOs’ culturally transmitted risk preferences on corporate investment (acquisitions and capital expenditures (Capx)). Our finding is robust to controlling for economic and institutional differences as well as genetic differences across countries of origin and does not depend on first-generation immigrant CEOs. CEOs’ risk preferences seem to have a causal influence on risky and discretionary corporate decisions such as acquisitions. But the association between CEO risk preferences and routine and less risky decisions such as Capx is largely explained by firm-CEO matching. Our results provide novel evidence of important social transmission of risk preferences, their effect on corporate investment policies, and the interplay of the culturally transmitted preferences of CEOs, corporate boards, and other top executives.
About the speaker:
Stephan Siegel is Associate Professor at University of Washington. He obtained his MPhil and Ph.D. from Columbia University. Stephan’s research interests are mainly in individual investor behavior, household finance as well as international finance. His research has been published on several leading financial journals, such as Journal of Finance, Journal of Financial Economics, and Review of Financial Studies. His current research is “Stock Market Valuations across U.S. States”, “The Fetal Origins Hypothesis in Finance: Prenatal Environment and Financial Risk Taking” and “The Common Component of Idiosyncratic Volatility”.
