Do CEOs who trade shares adopt more aggressive corporate investment strategies?

This paper investigates whether CEOs who have active share trading accounts engage in higher levels of corporate investment. Individuals who allocate a higher proportion of their wealth to equities, as opposed to fixed income assets, are by definition less risk averse. We find that this behavioral attribute is consistent in both the personal and corporate domain. Corporations with trader CEOs have higher capital expenditures and make significantly more acquisitions, and CEOs with higher portfolio turnover engage in riskier forms of corporate investment. The findings shed light on how shareholders can better align CEO preferences with their own. These conclusions are robust to adjustments for potential endogeneity in the choice of CEO for a specific firm and sample selection bias.