An Empirical Study Of Top Managers' Education And Their Corporate Risk-Taking

Corporate risk-taking level is essential for corporation survivability and long term development. It captures risk preference of corporate senior managers. Researchers have shown managers'decision-making styles and risk preferences differed by their education backgrounds. Based on human capital theory and prospect theory, this study empirically studied listed companies from2003-2012in China and examined whether or not senior managers help explain their level of corporate risk taking. We used volatility of earnings as the standard proxy of risk, found significant relationship between senior managers' education background and corporate risk-taking level. This study concentrates on top-ranking managers of listed companies in China, thoroughly reveals the overall education situation by analyzing their education characteristics, which helps understand education system and patterns in China and provide practical implications for developments of education system and modern university institutions.This study demonstrates the positive effect of education on individuals'capabilities and competence. Senior managers in listed companies of China have average degree of undergraduate or above. Managers who have overseas education experiences or majored in management or economics subjects have more likely proper risk decisions which benefit corporate long-term growth. It is conducive for corporations to encourage and guide senior managers taking courses of such subjects and having some overseas education experiences. This study could not prove that whether universities belongs "985""211" education projects have significant influences on senior managers'risk preference and risk decision-making.As corporate human resource management, this study provides suggestions for corporate recruitment and manager self-improving. Managers with a higher level of education will make less risky strategic choices, leading to less volatile outcomes as a direct consequence of greater risk-aversion. Managers majored in managements or economics are more suitable for corporate long term growth and survivability. These results have important implications for corporate governance. Moreover, it can also provide evidences of how present education system works on people in China.