Are MBA CEOs really more risk-averse?

This paper extends the literature on upper echelons theory that emphasizes the impact of top executives' personal characteristics on their choices by examining the relationship between CEOs holding MBAs and the riskiness of corporate policies, including investment and financial policies. To do so, data belonging to all stocks listed on the S&P 500 is collected to cover the period from 2005 to 2020 and analyzed using a panel regression model. The findings show that CEOs holding MBAs tend to undertake less risky investments compared to others, but this negative relationship is induced by unobservable heterogeneities across firms and time-varying heterogeneity across industries. Moreover, the findings failed to find any relationship between CEO-holding MBAs and financial leverage, while the relationship is negative between CEO-holding MBAs and corporate liquidity. These findings strongly deny the well-documented risk-aversion behavior of CEO-holding MBAs and support their belief in “profit-first” and self-interest” principles.