IDEAS home Printed from https://ideas.repec.org/a/kap/asiapa/v39y2022i1d10.1007_s10490-020-09725-x.html
   My bibliography  Save this article

CEO age and risk-taking of family business in Malaysia: The inverse S-curve relationship

Author

Listed:
  • Siew-Boey Yeoh

    (Universiti Sains Malaysia)

  • Chee-Wooi Hooy

    (Universiti Sains Malaysia)

Abstract

The relationship between CEO age and corporate risk-taking has remained inconclusive after decades of research. This study contends that CEO may have different risk-taking propensities at different age stages and the relationship could be better captured by nonlinear function. Using a large sample of 6169 firm-year observations of public listed companies in Malaysia, we study the risk-taking behaviour of CEO for the period of 2009 to 2017. We find that CEO age has an inverse U-shaped relationship, such that risk-taking increases with CEO age but reduces beyond certain age threshold. Besides, drawing on socioemotional wealth perspective, we further examine the moderating effect of family CEO. We find that near-retirement family CEO reverses the conservative behaviour at old age and results an inverse S-curved relationship. Findings of this paper yields implication for family business and policymakers seeking to encourage risk-taking behaviour in emerging countries.

Suggested Citation

  • Siew-Boey Yeoh & Chee-Wooi Hooy, 2022. "CEO age and risk-taking of family business in Malaysia: The inverse S-curve relationship," Asia Pacific Journal of Management, Springer, vol. 39(1), pages 273-293, March.
    • Handle: RePEc:kap:asiapa:v:39:y:2022:i:1:d:10.1007_s10490-020-09725-x
    DOI: 10.1007/s10490-020-09725-x
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10490-020-09725-x
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10490-020-09725-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Yao, Rui & Sharpe, Deanna L. & Wang, Feifei, 2011. "Decomposing the age effect on risk tolerance," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(6), pages 879-887.
    2. Lu, Jun & Wang, Wei, 2018. "Managerial conservatism, board independence and corporate innovation," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 1-16.
    3. Kenneth R. MacCrimmon & Donald A. Wehrung, 1990. "Characteristics of Risk Taking Executives," Management Science, INFORMS, vol. 36(4), pages 422-435, April.
    4. Kevin Au & Flora Chiang & Thomas Birtch & Zhujun Ding, 2013. "Incubating the next generation to venture: The case of a family business in Hong Kong," Asia Pacific Journal of Management, Springer, vol. 30(3), pages 749-767, September.
    5. Vincent L. Barker , III & George C. Mueller, 2002. "CEO Characteristics and Firm R&D Spending," Management Science, INFORMS, vol. 48(6), pages 782-801, June.
    6. Marianne Bertrand & Antoinette Schoar, 2003. "Managing with Style: The Effect of Managers on Firm Policies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1169-1208.
    7. Timothy B. Palmer & Robert M. Wiseman, 1999. "Decoupling risk taking from income stream uncertainty: a holistic model of risk," Strategic Management Journal, Wiley Blackwell, vol. 20(11), pages 1037-1062, November.
    8. Elie Matta & Paul W. Beamish, 2008. "The accentuated CEO career horizon problem: evidence from international acquisitions," Post-Print hal-00486653, HAL.
    9. Lang, Larry & Ofek, Eli & Stulz, Rene M., 1996. "Leverage, investment, and firm growth," Journal of Financial Economics, Elsevier, vol. 40(1), pages 3-29, January.
    10. Norden, Lars & van Kampen, Stefan, 2013. "Corporate leverage and the collateral channel," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5062-5072.
    11. Hall, Thomas W., 2012. "The collateral channel: Evidence on leverage and asset tangibility," Journal of Corporate Finance, Elsevier, vol. 18(3), pages 570-583.
    12. Elnahas, Ahmed M. & Kim, Dongnyoung, 2017. "CEO political ideology and mergers and acquisitions decisions," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 162-175.
    13. John Child, 1974. "Managerial And Organizational Factors Associated With Company Performance Part I," Journal of Management Studies, Wiley Blackwell, vol. 11(3), pages 175-189, October.
    14. Wintoki, M. Babajide & Linck, James S. & Netter, Jeffry M., 2012. "Endogeneity and the dynamics of internal corporate governance," Journal of Financial Economics, Elsevier, vol. 105(3), pages 581-606.
    15. Jeffrey M. Wooldridge, 2001. "Applications of Generalized Method of Moments Estimation," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 87-100, Fall.
    16. Dechow, Patricia M. & Sloan, Richard G., 1991. "Executive incentives and the horizon problem : An empirical investigation," Journal of Accounting and Economics, Elsevier, vol. 14(1), pages 51-89, March.
    17. Li, Xiaoyang & Low, Angie & Makhija, Anil K., 2017. "Career concerns and the busy life of the young CEO," Journal of Corporate Finance, Elsevier, vol. 47(C), pages 88-109.
    18. Noor Afza Amran & Ayoib Che Ahmad, 2009. "Family Business, Board Dynamics and Firm Value: Evidence from Malaysia," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 7(1), pages 53-74, December.
    19. Natenapha Yabushita & Akira Suehiro, 2014. "Family business groups in Thailand: coping with management critical points," Asia Pacific Journal of Management, Springer, vol. 31(4), pages 997-1018, December.
    20. Yim, Soojin, 2013. "The acquisitiveness of youth: CEO age and acquisition behavior," Journal of Financial Economics, Elsevier, vol. 108(1), pages 250-273.
    21. Coles, Jeffrey L. & Daniel, Naveen D. & Naveen, Lalitha, 2006. "Managerial incentives and risk-taking," Journal of Financial Economics, Elsevier, vol. 79(2), pages 431-468, February.
    22. Rangarajan K. Sundaram & David L. Yermack, 2007. "Pay Me Later: Inside Debt and Its Role in Managerial Compensation," Journal of Finance, American Finance Association, vol. 62(4), pages 1551-1588, August.
    23. Vanessa M. Strike & Pascual Berrone & Stephen G. Sapp & Lorenzo Congiu, 2015. "A Socioemotional Wealth Approach to CEO Career Horizons in Family Firms," Journal of Management Studies, Wiley Blackwell, vol. 52(4), pages 555-583, June.
    24. Prendergast, Canice & Stole, Lars, 1996. "Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1105-1134, December.
    25. Bebchuk, Lucian Arye & Stole, Lars A, 1993. "Do Short-Term Objectives Lead to Under- or Overinvestment in Long-Term Projects?," Journal of Finance, American Finance Association, vol. 48(2), pages 719-729, June.
    26. Serfling, Matthew A., 2014. "CEO age and the riskiness of corporate policies," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 251-273.
    27. Ahsan Habib & Mostafa Monzur Hasan, 2017. "Firm life cycle, corporate risk-taking and investor sentiment," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(2), pages 465-497, June.
    28. Ronald C. Anderson & David M. Reeb, 2003. "Founding-Family Ownership and Firm Performance: Evidence from the S&P 500," Journal of Finance, American Finance Association, vol. 58(3), pages 1301-1327, June.
    29. Cazier, Richard A., 2011. "Measuring R&D curtailment among short-horizon CEOs," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 584-594, June.
    30. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    31. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112.
    32. Zeki Simsek, 2007. "CEO tenure and organizational performance: an intervening model," Strategic Management Journal, Wiley Blackwell, vol. 28(6), pages 653-662, June.
    33. Cho, Sam Yul & Kim, Sang Kyun, 2017. "Horizon problem and firm innovation: The influence of CEO career horizon, exploitation and exploration on breakthrough innovations," Research Policy, Elsevier, vol. 46(10), pages 1801-1809.
    34. Cynthia E. Devers & Gerry McNamara & Robert M. Wiseman & Mathias Arrfelt, 2008. "Moving Closer to the Action: Examining Compensation Design Effects on Firm Risk," Organization Science, INFORMS, vol. 19(4), pages 548-566, August.
    35. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    36. Bhagat, Sanjai & Welch, Ivo, 1995. "Corporate research & development investments international comparisons," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 443-470, April.
    37. Ronald C. Anderson & David M. Reeb, 2003. "Founding‐Family Ownership and Firm Performance: Evidence from the S&P 500," Journal of Finance, American Finance Association, vol. 58(3), pages 1301-1328, June.
    38. Elie Matta & Paul W. Beamish, 2008. "The accentuated CEO career horizon problem: evidence from international acquisitions," Strategic Management Journal, Wiley Blackwell, vol. 29(7), pages 683-700, July.
    39. Han, Bong H. & Manry, David, 2004. "The value-relevance of R&D and advertising expenditures: Evidence from Korea," The International Journal of Accounting, Elsevier, vol. 39(2), pages 155-173.
    40. Weng, Tzu-Ching & Chi, Hsin-Yi, 2019. "Family succession and business diversification: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 53(C), pages 56-81.
    41. Huasheng Gao, 2010. "Market Misvaluation, Managerial Horizon, and Acquisitions," Financial Management, Financial Management Association International, vol. 39(2), pages 833-850, June.
    42. A. Rashad Abdel-Khalik, 2014. "CEO Risk Preference and Investing in R&D," Abacus, Accounting Foundation, University of Sydney, vol. 50(3), pages 245-278, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mamdouh Abdulaziz Saleh Al-Faryan & Jassem Alokla, 2023. "Do Publicly Listed Insurance Firms in Saudi Arabia Have Strong Corporate Governance?," Economies, MDPI, vol. 11(1), pages 1-41, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chari, Murali D.R. & David, Parthiban & Duru, Augustine & Zhao, Yijiang, 2019. "Bowman's risk-return paradox: An agency theory perspective," Journal of Business Research, Elsevier, vol. 95(C), pages 357-375.
    2. Kabir, Rezaul & Li, Hao & Veld-Merkoulova, Yulia, 2018. "Do managers act opportunistically towards the end of their career?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 56(C), pages 218-232.
    3. Burney, Robert B. & James, Hui Liang & Wang, Hongxia, 2021. "Working capital management and CEO age," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    4. Çolak, Gönül & Korkeamäki, Timo, 2021. "CEO mobility and corporate policy risk," Journal of Corporate Finance, Elsevier, vol. 69(C).
    5. Yeoh, Siew-Boey & Hooy, Chee-Wooi, 2022. "Generation effects and managerial risk taking," Journal of Business Research, Elsevier, vol. 139(C), pages 918-934.
    6. Mekhaimer, Mohamed & Abakah, Alex Annan & Ibrahim, Awad & Hussainey, Khaled, 2022. "Subordinate executives' horizon and firm policies," Journal of Corporate Finance, Elsevier, vol. 74(C).
    7. Hari P. Adhikari & Marcin W. Krolikowski & James Malm & Nilesh B. Sah, 2021. "Working capital (mis)management – impact of executive age," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(1), pages 727-761, March.
    8. Trabert, Sebastian, 2023. "Do younger CEOs really increase firm risk? Evidence from sudden CEO deaths," Journal of Corporate Finance, Elsevier, vol. 79(C).
    9. Li, Xiaoyang & Low, Angie & Makhija, Anil K., 2017. "Career concerns and the busy life of the young CEO," Journal of Corporate Finance, Elsevier, vol. 47(C), pages 88-109.
    10. Mauro Romano & Alessandro Cirillo & Donata Mussolino & Luca Pennacchio, 2019. "CEO career horizons and when to go public: the relationship between risk-taking, speed and CEO power," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 23(1), pages 139-163, March.
    11. Duong, Kiet Tuan & Banti, Chiara & Instefjord, Norvald, 2021. "Managerial conservatism and corporate policies," Journal of Corporate Finance, Elsevier, vol. 68(C).
    12. Pascal Nguyen & Nahid Rahman & Ruoyun Zhao, 2018. "CEO characteristics and firm valuation: a quantile regression analysis," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 22(1), pages 133-151, March.
    13. Geoffrey C. Friesen & Noel Pavel Jeutang & Emre Unlu, 2022. "The Effect of Unsuccessful Past Repurchases on Future Repurchasing Decisions," Management Science, INFORMS, vol. 68(1), pages 716-739, January.
    14. Yaoqin Li & Xixiong Xu & Yushu Zhu & Mamiza Haq, 2021. "CEO decision horizon and corporate R&D investments: an explanation based on managerial myopia and risk aversion," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(4), pages 5141-5175, December.
    15. Giorgio Barba Navaretti & Davide Castellani & Fabio Pieri, 2022. "CEO age, shareholder monitoring, and the organic growth of European firms," Small Business Economics, Springer, vol. 59(1), pages 361-382, June.
    16. Serfling, Matthew A., 2014. "CEO age and the riskiness of corporate policies," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 251-273.
    17. Hou, Wanrong & Li, Sali & Priem, Richard L., 2013. "How do CEOs matter? The moderating effects of CEO compensation and tenure on equity ownership in international joint ventures," Journal of International Management, Elsevier, vol. 19(2), pages 138-151.
    18. Hui Liang James, 2020. "CEO age and tax planning," Review of Financial Economics, John Wiley & Sons, vol. 38(2), pages 275-299, April.
    19. Daewoung Choi & Hyunju Shin & Kyoungmi Kim, 2023. "CEO’s Childhood Experience of Natural Disaster and CSR Activities," Journal of Business Ethics, Springer, vol. 188(2), pages 281-306, November.
    20. Michaela Wrede & Tobias Dauth, 2020. "A temporal perspective on the relationship between top management team internationalization and firms' innovativeness," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(4), pages 542-561, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:asiapa:v:39:y:2022:i:1:d:10.1007_s10490-020-09725-x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.