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The Impact of early-life Natural Disaster Experiences on the Corporate Innovation by CEOs

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  • Chong Chen
  • Yongsi He
  • Kai Wang
  • Shuo Yan

Abstract

We examine the relationship between CEO early-life natural disaster experience and corporate innovation. As China has a strict household registration system, we measure CEOs’ early-life natural disaster experience via defining CEOs’ birthplaces based on their official ID and linking it to the Chinese natural disaster database. We find that firms with CEOs who were exposed to natural disasters are less innovative. Importantly, we use textual analysis techniques to document two possible channels through which CEO natural disasters experience to stymie corporate innovation: CEO shortsightedness and risk-averse. Our results are robust to the instrumental variable approach, alternative definitions of early-life time windows and innovation, as well as difference-in-differences test based on CEO turnover events. Taken together, this study sheds light on the relationship between natural disasters and management’s myopia behavior.

Suggested Citation

  • Chong Chen & Yongsi He & Kai Wang & Shuo Yan, 2022. "The Impact of early-life Natural Disaster Experiences on the Corporate Innovation by CEOs," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(14), pages 3953-3975, November.
    • Handle: RePEc:mes:emfitr:v:58:y:2022:i:14:p:3953-3975
    DOI: 10.1080/1540496X.2022.2073817
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    Cited by:

    1. 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.
    2. Huong Trang Kim, 2023. "Linking Trait Affectivity, Cognitive Ability, and Preferences Among Top Managers: Insights From a Lab-In-The-Field Experiment," Evaluation Review, , vol. 47(3), pages 479-503, June.

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