Study: With marriage comes a great sense of responsibility

Being married to your job may just not be enough to do your company good. What if being a married person means you as a chief executive officer (CEO) are less likely to engage in risky business, for example from profiting from insider trading? This is what the recently published paper “CEO Marital Status and Insider Trading” suggests. The paper was a collective effort between the authors Professor Dr. Shushu Liao at Kühne Logistics University, Prasad Hedge and Professor Nhut H. Nguyen from Auckland University of Technology as well as Rui Ma from La Trobe University in Melbourne.

Essentially what they found out is that CEOs who are tied up in marriage, are less likely to engage in opportunistic trades. What sounds like a positive trait as in the safer the better, should certainly not be a call to change hiring policies. It is ultimately a statistical probability. It can also mean that your company earns less because no risks are being taken.

More risk taking – potentially more innovation

“We are not prescribing HR-recruiters to only hire married candidates.”, says Professor Dr. Liao. Although risk in itself must not be a bad thing. Professor Dr. Liao explains: “A healthy appetite for risk can also fuel innovation and be a source of creativity.” Risky decision making could also push the dynamics and company’s performance higher. On the other hand, if those risky activities are not the result of well informed decisions or good corporate governance, the probability of doing harm in the end may be non-negligible.

What’s the appeal of inside trading?

Even as a CEO of a company you have the right to own shares of that same company. Of course there is the risk of your profiting from information that might not be public and thus engage in illegal inside trading. 60% of the derivative lawsuits against officers or directors brought by shareholders on behalf of the company today contain allegations of inside trading. Corporate managers do own a significant average amount of 12% shares in the company they are running. Without wanting to lump everyone together, you could say there is an unspoken appeal. With that in mind the question is what prevents CEOs to engage in inside trading

Married people have others to think about

Professor Liao and her colleagues are not the only ones who focus on personal affairs of company heads. Many recent studies show CEO’s personal experiences , family ties or upbringing have an effect on how they run their business – in other words CEOs are just as human as everyone else. And as humans they do get married and have families. Studies have shown how being in a marriage can make you a more socially committed person, it can make you just feel better and give you a sense of responsibility and make you avoid risky behaviors.

Is it worth the risk?

It is understandable that especially family members would have to think about the effects on other members of the family if they were to make risky decisions. For example if a married CEO would be sued over inside trading they would risk losing a job and a reputation. They would definitely risk the standard of living of not only themselves but also of their family and children. The paper’s main argument is that CEOs who are married show less of a risk appetite. The paper provides evidence that married CEOs are less likely to make risky decisions.


Large sample of source material

The authors of the paper have used a large sample of insider trading transactions made by CEOs of U.S. public firms from 1996 to 2019. Then they used marital information from the study “Marriage and managers’ attitudes to risk” in Management Science by Nikolai Roussanov and Pavel Savor from 2014 and the Marquis Who’s Who in Finance and Industry database.