Is COVID-19 a turning point? Evidence from CEOs' investment behavior and risk tolerance

Abstract

Purpose

This study explores the influence of the coronavirus disease 2019 (COVID-19) career experience on the investment behavior and risk tolerance of chief executive officers (CEOs). Specifically, this study focuses on CEOs' abilities to allocate financial assets and maintain solvency.

Design/methodology/approach

This study adopts a comprehensive approach to analyze financial assets and asset-to-liability ratios. Financial data and individual information of CEOs from listed companies are collected from 2020Q1 to 2021Q4, along with statistics on confirmed COVID-19 cases. Instrumental and alternative variables are used to examine the robustness and endogeneity of the research, ensuring a thorough analysis.

Findings

A significant positive correlation is revealed between CEOs' COVID-19 career experience and their capacity to effectively allocate financial assets. However, COVID-19 has a negative effect on firm performance in terms of solvency. These findings contribute to the empirical evidence linking the pandemic to company performance, representing part of the initial research in this area.

Originality/value

The study suggests that the implementation of potential policy implications, such as loose monetary policies and tax and fee reduction measures, may alleviate the tax burden on listed companies.

Citation

Rahman, M.J., Zhu, H. and Beiyi, S. (2023), "Is COVID-19 a turning point? Evidence from CEOs' investment behavior and risk tolerance", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-02-2023-0264