The Testosterone Level of the CEO and Corporate Risk Taking

Subject Areas : Journal of Investment Knowledge

Mehdi  Safari Griyly ¹ (Assistant prof, Department of accounting,Bandargaz Branch, Islamic Azad University, Bandargaz,Iran. (Corresponding Author))
Yasser  Rezaei Pitenoei ² (Faculty member and director of the Department of Accounting, Golestan Institue of Higher Education, Gorgan, Iran.)
Mohammad  Norouzi ³ (Ph.D. Student, Department of accounting, Babol Branch, Islamic Azad University, Babol,Iran.)

Received: 2017-02-20 Accepted : 2017-06-20 Published : 2017-12-22

Keywords: Testosterone, Facial width to height ratio, Corporate Risk Taking,

Abstract :

Testosterone is one of the most important masculine hormones, playing a major role in shaping men’s face and their behavioral characteristics including risk taking. Measuring the testosterone level of the CEOs, recent studies have revealed a significant relationship between biological characteristics of the CEOs and corporate economic decisions. Therefore, the present study aims to investigate the impact of the facial width to height ratio (fWHR) of the CEO as one of the factors determining the testosterone level on risk-taking companies. To do so, a sample of 49 firms listed in Tehran Stock Exchange during the years 2014-2016 were selected and then tested using multivariate regression model based on panel data technique. The findings indicate that the high testosterone level in CEOs tends to result in corporate risk taking. The findings of current study not only fill existing gaps in the field, but also contribute to decision-making practices in Stock Exchange.      

References:

*       محمود آبادی، حمید و زمانی، زینب (1395). بررسی رابطه بین ریسک پذیری شرکت و عملکرد مالی با تاکید بر سازوکارهای راهبری شرکتی. فصلنامه مطالعات تجربی حسابداری مالی، سال 12، شماره 49، بهار 95، صص 141-170.

*       ملکیان، اسفندیار و شایسته مند، حمیدرضا (1394). بررسی تاثیر سازوکارهای مدیریتی راهبری شرکتی بر ریسک پذیری شرکت های پذیرفته شده در بورس اوراق بهادار تهران. فصلنامه حسابداری مالی، سال هفتم، شماره 28، صص 126-105.

*       Apicella, C. L.(2011). “Androgens and competitiveness in men.” Journal of Neuroscience, Psychology, and Economics, Vol 4(1), Feb 2011, 54-62.

*       Apicella, C. L.; A. Dreber; B. Campbell; P. B. Gray; M. Hoffman and A. C.(2008). Little. “Testosterone and financial risk preferences.” Evolution and Human Behavior, 29 : 384-390.

*       Bandiera, O.; L. Guiso(2010). A. Prat and R. Sadun 'Matching firms, managers, and incentives.Working Paper, August 3, 10-73.

*       Bos, P. A., Terburg, D., and Van Honk, J. (2010). Testosterone Decreases Trust in Socially Naïve Humans. Proceedings of the National Academy of Sciences, 107(1), 9991-9995.

*       Carre, J. M., and C. M. McCormick, (2008). In your face: facial metrics predict aggressive behavior in the laboratory and in varsity and professional hockey players. Proceedings of the Royal Society Bulletin” Biological Sciences, 275, 2651-2656.

*       Carre, J. M., C. M. McCormick, and C. J. Mondloch, (2009). Facial structure is a reliable cue of aggressive behavior. Psychological Science, 20, 1194-1198.

*       Carre, J. M., Murphy, K. R., and Hariri, A. R. (2011). What Lies Beneath the Face of Aggression? Social Cognitive and Affective Neuroscience, 74(8), 350-358.

*       Cesarini, D.; M. Johannesson; P. Lichtenstein; Ö. Sandewall and B. Wallace.(2010). “Genetic Variation in Financial Decision-Making.” The Journal of Finance, 65: 1725-1754.

*       Christiansen, K. and E.-M. Winkler.(1992). “Hormonal, anthropometrical, and behavioural correlates of physical aggression in !Kung San men of Namibia.” Aggressive Behavior 18, 271-280.

*       Eisenegger, C.; M. Naef; R. Snozzi; M. Heinrichs and E. Fehr. (2010). “Prejudice and truth about the effect of testosterone on human bargaining behaviour.” Nature 463, 356-359.

*       Faccio, M., Marchica, M.T. and Mura, R. (2016). CEO Gender, Corporate Risk-Taking, and the Efficiency of Capital Allocation (February 12, 2016). Available at :SSRN: https://ssrn.com/abstract= 2021136 or http:// dx . doi . org / 10.2139/ssrn.2021136.

*       Hartgens, F., and H. Kuipers, (2004). “Effects of androgenic-anabolic steroids in athletes,” Sports Medicine,  34, 513–554.

*       Haselhuhn, M. P. and E. M. Wong, (2011). “Bad to the bone: facial structure predicts unethical behaviour.” Proceedings of the Royal Society B: Biological Sciences.

*       Hirshleifer, D., A. LOW and S. H. Teoh, (2012). “Are Overconfident CEOs Better Innovators?,” Journal of Finance, 67(4): 1457–1498.

*       Jia, Y., L. van Lent, Y. Zeng, (2014). Testosterone and Financial Misreporting. SSRN eLibrary http://ssrn.com/abstract=2265510.

*       Johnson, R. T., and Breedlove, S. M. (2010). Human Trust: Testosterone Raises Suspicion. Proceedings of the National Academy of Sciences 107(22), 11149-11150.

*       Kamiya, S., Kim, Y. and Suh, J. (2016). The Face of Risk: CEO Testosterone and Risk Taking Behavior. Available at SSRN: https://ssrn.com / abstract = 2557038 or http:// dx.doi.org /10.2139/ ssrn . 2557038 .

*       Keck, S., and Tang ,w. (2013). CEO facial structure and corporate risk taking, Available at: https://papers.ssrn.com /sol3/papers.cfm? abstract_id= 2547324.

*       Kim, A. Y. H., (2013). Self-attribution bias of the CEO: Evidence from CEO interviews on CNBC. Journal of Banking & Finance, 2472-2489.

*       Lefevre, C. E., G. J. Lewis, D. I. Perrett and L. Penke, (2013). “Telling facial metrics: facial width is associated with testosterone levels in men,” Evolution and Human Behavior, 34(4): 273-279.

*       Lindberg, M. K.; L. Vandenput; S. Moverare Skrtic; D. Vanderschueren; S. Boonen; R. Bouillon and C. Ohlson,(2005). “Androgens and the skeleton.” Minerva endocrinologica 30: 15-25.

*       Malmendier, U., and G. Tate, (2005). CEO Overconfidence and Corporate Investment. The Journal of Finance, Vol.XL, No.6, 2661-2700.

*       Mayew, W. J., C. A. Parsons, and M. Venkatachalam, (2013). Voice pitch and the labor market success of male chief executive officers Evolution and Human Behavior, 34, 243-248.

*       Mehta, P. H. and J. Beer. (2009). Neural mechanisms of the testosterone-aggression relation: the role of orbitofrontal cortex.  Journal of Cognitive Neuroscience 22: 2357-2368.

*       Mehta, P. H.; A. C. Jones and R. A. Josephs.(2008). “The Social Endocrinology of Dominance: Basal Testosterone Predicts Cortisol Changes and Behavior Following Victory and Defeat.” Journal of Personality and Social Psychology 94: 1078-1093.

*       Mills, J. (2014). CEO Facial Width Predicts Firm Financial Policies. Available at SSRN: https://ssrn.com / abstract = 2503582 or http: // dx.doi.org /10.2139 /ssrn .2503582.  

*       Morris, J. A., Jordan, C. L., and Breedlove, S. M. (2004). Sexual Differentiation of the Vertebrate Nervous System. Nat Neurosci, 7(1), 1034-1039.

*       Penton-Voak, I. S. and J. Y. Chen.(2004). “High salivary testosterone is linked to masculine male facial appearance in humans.” Evolution and Human Behavior 25: 229-241.

*       Perman, C., (2012). Wall Street’s Secret Weapon for Getting an Edge, July 11, http://www.cnbc.com/id/48149955.

*       Pound, N.; I. S. Penton - Voak and A. K. Surridge.(2009). “Testosterone responses to competition in men are related to facial masculinity.” Proceedings of the Royal Society B: Biological Sciences 276: 153-159.

*       Rasband, W. S. (2011). ImageJ [Computer software]. Retrieved from http: //imagej . nih .gov /ij/.

*       Roberti, J. W., (2004). “A review of behavioral and biological correlates of sensation seeking,” Journal of Research in Personality, 38: 256–279.

*       Sapienza, P.; L. Zingales and D. Maestripieri.(2009). “Gender differences in financial risk aversion and career choices are affected by testosterone.” Proceedings of the National Academy of Sciences 106 (2009): 15268-15273.

*       Stirrat, M., and Perrett, D. I. (2010). Valid Facial Cues to Cooperation and Trust: Male Facial Width and Trustworthiness. Psychological Science, 21(1), 349–354.

*       Thornhill, R. and A. P. Moller. (1997). “Developmental stability, disease and medicine.” Biological Reviews 72: 497-548.

*       Van Honk, J., Terbrg, D., and Bos, P. A. (2011). Further Notes on Testosterone as a Social Hormone. Trends in cognitive sciences, 15(15), 291-292.

*       Verdonck, A.; M. Gaethofs; C. Carels and F. De Zegher. (1999). “Effect of low-dose testosterone treatment on craniofacial growth in boys with delayed puberty.” The European Journal of Orthodontics 21: 137-143.

*       Weston, E. M., Friday, A. E. and Lio, P. (2007). Biometric Evidence that Sexual Selection Has Shaped the Hominine Face. PLoS ONE. http://dx.doi.org/10.1371/journal.pone.0000710.

*      Wong, E.M., Ormitson, M.E., and Haselhuhn, M.P. (2011). A Face Only an Investor Could Love: CEOs‘ Facial Structure Predicts their Firms‘ Financial Performance. Psychological Science, 22(12), 1478– 1483.