Wealth and risk in the c-suite

: to what extent CEO and board net wealth shape risk preferences and firm stability in Norway

Abstract

Wealth plays a central role in shaping economic behavior, influencing individual risk preferences, savings decisions, investment choices, and strategic actions under uncertainty. This study examines the extent to which personal net wealth affects executive risk aversion and firm risk in for-profit Norwegian firms from 2010 to 2023. Leveraging comprehensive administrative data, the analysis constructs a revealed-preference measure of risk aversion based on portfolio allocations. Fixed-effects panel regressions show that higher CEO net wealth is associated with lower absolute risk aversion. However, firm risk, as measured by the Altman Z=-score, is primarily influenced by CEO wealth directly, rather than being mediated by changes in risk aversion. No moderating effect is found for board net wealth on the relationship between CEO risk aversion and firm risk. Sensitivity analyses reveal that the board's share ownership ratio - defined as the board's median total market value of equity holdings in the employing firm relative to its members' total net wealth - directly reduces firm risk and moderates the effect of CEO net wealth on risk outcomes. The findings contribute to corporate governance research by integrating the concept of wealth into the analysis of risk-taking and oversight dynamics. In the context of principal-agent theory, the results indicate that overlooking personal wealth in governance design may lead to misaligned incentives and reduced oversight effectiveness.

Date of Award	13 Oct 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Amir Sasson (Supervisor)