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The impact of rookie CEOs on corporate risk-taking

Author

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  • Zhong, Linfei
  • He, Yuanqiong

Abstract

Herein, 42,517 firm-year observations spanning 2000–2023 from A-share listed Chinese companies were examined concerning the effect of rookie CEOs on corporate risk-taking and its underlying mechanisms. Notably, rookie CEOs remarkably increased corporate risk-taking, and they remain valid while using alternative measures and propensity score matching. The key regression coefficient was β = 0.005 on Risktaking1. Mechanism analysis also indicated that rookie CEOs promote higher risk-taking by enhancing firm agility and strengthening managerial power. Furthermore, heterogeneity tests show a stronger effect in firms that lack political connections, have overconfident management, and possess a lower share of male executives. This study reported the role of rookie CEOs in strategic decision-making and offered policy implications for corporate governance. Boards of directors should set ex-ante risk constraints during the initial 3 years of CEO tenure to balance high-risk strategies with the requirement for long-term sustainable growth.

Suggested Citation

  • Zhong, Linfei & He, Yuanqiong, 2025. "The impact of rookie CEOs on corporate risk-taking," International Review of Financial Analysis, Elsevier, vol. 107(C).
    • Handle: RePEc:eee:finana:v:107:y:2025:i:c:s105752192500746x
    DOI: 10.1016/j.irfa.2025.104659
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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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