タイトル：Managerial risk aversion and corporate risk taking
Studies argue that firms with risk-averse managers who hold undiversified portfolios take less risks; however, the validity of such arguments has not been directly tested. We develop a simple model and analytically demonstrate this argument. We then conduct a survey with Japanese Chief Financial Officers (CFOs) and directly measure their risk aversion and degree of portfolio diversification. We find that firms with CFOs who have higher personal risk aversion and undiversified portfolios take lower risks, in terms of lower investment, greater use of derivatives, and lower leverage.
Keywords: managerial risk aversion, undiversified portfolio, risk taking, risk hedging