CEO wealth and company risk : an empirical investigation of relationships between CEO wealth and leverage ratios

Persen, Øivind Fossum
Master thesis
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URI
http://hdl.handle.net/11250/195531
Date
2013
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Abstract
Capital structure theorists have argued for different determinants of leverage ratios

throughout the age of modern corporate finance literature, with thorough empirical

evidence of key determinants having surfaced in recent years. In this paper I add risk

aversion into the equation, and find a significant relationship between CEO risk aversion

proxied by non-firm wealth and leverage ratios. I also find significant relationships

between percentage of wealth at stake in the company the CEO manages and leverage

ratios, although this latter finding should be treated with caution due to the contingency

of causality.