Star CEOs: influence on competitor CEOs' risk-taking

Abstract

Purpose

Research has focused primarily on the antecedents that influence the risk taking of CEOs themselves. This study examines how an important event experienced by a CEO at a direct rival firm influences a CEO's risk-taking. It also examines how prior firm performance relative to aspirations moderates the relationship.

Design/methodology/approach

In order to test the hypothesis, the authors perform an a difference-in-differences methodology.

Findings

Using a difference-in-differences methodology, we find that when a CEO wins a prestigious CEO award, competitor CEOs increase their firm risk-taking in the post-award period. The proclivity becomes stronger when their prior firm performance relative to aspirations is better. These findings suggest that a CEO winning a prominent CEO award influences competitor CEOs' risk-taking.

Originality/value

This study contributes to the literature on managerial risk-taking by highlighting that a star CEO winning a prominent award may serve as a striving aspiration and induce competitor CEOs to take risks, and that two different types of aspirations – striving and competitive aspirations – interact to influence the competitor CEOs' risk-taking.

Citation

Cho, S.Y. and Choi, Y. (2024), "Star CEOs: influence on competitor CEOs' risk-taking", Management Decision, Vol. 62 No. 3, pp. 815-839. https://doi.org/10.1108/MD-11-2022-1606