Nostalgia, Limited Attention and Stock Performance
– Evidence from Hurricane Seasons in China
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There is abundant evidence that a company’s CEO can have a huge impact on its performance. However, no one has studied how a CEO's childhood experience of disasters affect his decisions now. This paper examines the variation of firm stock performance when CEO’s hometown is exposed to hurricanes. Using the CEO profile, firm-month return data and periodic hurricane records in China between 2000 and 2019, we establish a causal link on the effect of CEO hometown disaster and stock underperformance. Further investigation by using DID method shows that this finding is not attributed to firms’ physical damage or less risk preference induced by CEO’s hometown disaster. The empirical results lend support to the limited attention exhibited by the influenced CEOs.
Hometown hurricane; stock return; CEO limited attention Introduction