For a moment it seemed almost unfair, or controversial: Judging someone by his or her past.
The beauty of research, though, is to find facts. And I realized that Cambridge Professor of Finance Ragavendra (“Raghu”) Rau wasn’t talking about judging at all – that was my mind’s own overlay.
Rather, Raghu – who won an Ig Nobel Prize – simply extended what’s been well-proven in the medical/epidemiological and psychological arenas to investing: Early-childhood traumas (“What Doesn’t Kill You WIll Only Make You More Risk-Loving: Early-Life Disasters and CEO Behavior” in the Journal of Finance) and prenatal pollution exposure (“Hazed and Confused: Prenatal Pollutant Exposure and CEO Risk-Taking”) clearly affect later-in-life behavior in regular people, statistically speaking.
Wouldn’t these early-life traumas likewise affect the behavior of CEOs, too – again, statistically speaking?
Raghu says he’s found that they do, and that such CEOs tend to take more risks that don’t bring more benefits. While enough CEOs have likely come from stressed beginnings that it would seem neither fair nor accurate to make categorical judgments – and I hope nobody does – it’s interesting to see that pollution, for instance, has a far-reaching-enough impact to affect shareholder value via CEO behavior.
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