Poverty as a Double‐Edged Sword: How CEOs’ Childhood Poverty Experience Affect Firms’ Risk Taking

Abstract

AbstractThis study explores the potential effect of chief executive officers’ (CEOs’) childhood poverty experience on firms’ risk taking. By integrating upper echelon theory and life history theory, we show that CEOs with childhood poverty experience are willing to engage in firms’ risk taking due to their perceived survival threat. We also explore a new dimension of perceived survival threat and then propose that the temporal perception of survival threat influences CEOs’ choice of firms’ risk taking. Specifically, the relationship between CEOs’ childhood poverty experience and firms’ risk taking is moderated by CEOs’ current payment as reflected in their different choices of firms’ risk‐taking behaviours. Our empirical study employs a longitudinal analysis of Chinese publicly listed firms from 2003 to 2016. We also performed a two‐stage experiment of Chinese CEOs as a supplementary study to improve internal validity.