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7. Conclusion
This study investigates the relation between CEO’s Chinese zodiac and firm risk-taking behavior, and between CEO’s constellation and firm risk-taking behavior.
Prior research has provided evidence that demographic characteristics and
psychological traits of managers are important factors having influence on corporate performance and corporate risk based on upper-echelon theory. Different from prior studies that emphasize the impacts of CEO demographic characteristics on corporate risk-taking behavior and firm policies, this study uses Chinese zodiac and
constellation traits as proxies for CEO psychological traits.
Consistent with my prediction, I find that CEOs with more conservative Chinese zodiac are less risky. Those defined as conservative Chinese zodiacs, which are tiger, snake, rabbit, dog and pig, do not like to take risk and make less risky firm policies.
The relation between conservative Chinese zodiac and risk-taking behavior is
negative. Correspondingly, I also find that CEO’s constellation has an impact on firm risk-taking behavior. Although there is no empirical result to prove that CEOs with conservative constellation signs, which belong to earth element and water element, prefer less risk, we can find that CEOs with conservative constellation signs prefer more conservative firm policies in this study. Besides, based on my result, I find that the relation between CEO’s characteristic which is affected by Chinese zodiac and constellation is mainly driven by firms in the high-tech industry.
This is an interesting and worthy subject that I believe shareholders, board of directors and potential investors always want to seek for suitable CEOs who can both match the firms and create value for the firms since many studies have discovered that CEO characteristics actually influence firms, such as demographic characteristics, including age, tenure, educational background and career experience, (Hambrick &
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Mason, 1984; Berger, Ofek, & Yermack, 1997; Pegels & Yang, 2000; Graham &
Harvey, 2001; Barker & Mueller, 2002; Bertrand & Schoar, 2003; Chen, Hsu, &
Huang, 2010) and psychological traits, including risk aversion, overconfidence (Heaton, 2002; Malmandier & Tate, 2005; Landier & Thesmar, 2009; Malmendier, Tate, & Yan, 2011). The findings in this study also complement the studies of CEO characteristics.
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