Is that CEO a fan of excitement?

In ESG (Environmental, Social, and Governance), E stands for responsibility to the Earth, S stands for responsibility to society, and G stands for responsibility to shareholders. The person most responsible for safeguarding a company’s governance quality (G) is none other than its CEO. However, a company’s governance quality is sometimes challenging to assess objectively. For instance, can a CEO who is ambitious and growth-oriented, but frequently engages in acquisitions through risky borrowing be considered a responsible CEO? This question is hard to answer, but it’s undisputed that CEOs with different personality traits can vary in management styles. Research also confirms a correlation between CEO personality and company performance.

However, unless investors have deep interactions or extensive conversations with the CEO, it’s challenging to understand the CEO’s personality and management style in a short period. To address this issue, two American scholars conducted an interesting study using publicly available data, such as whether the CEO has a private pilot’s license, to infer the CEO’s management style.

Why choose a private pilot’s license as a tool to measure CEO personality? Looking at data, the death rate per hour of recreational flying is 32 times higher than driving a car. Previous academic research indicated that people who enjoy flying private planes generally prefer exciting and adventurous experiences. This inclination tends to make them more ambitious in other behaviors, such as driving, sex life, sports, and work. The same inclination also applies to retail investors—investors who enjoy excitement and adventure tend to trade more frequently in the stock market.

The study tracked data for a total of 15,627 years from different companies, with 1,016 years led by CEOs with recreational flying licenses. The results revealed three major findings: First, companies led by CEOs with recreational flying licenses have higher debt ratios and greater stock price volatility. Second, these CEOs are more inclined to acquire other companies, which is relatively neutral because acquiring companies with low PB (price-to-book) ratios technically can add value to the purchasing company. Third, CEOs who enjoy taking risks tend to have employment contracts with relatively lower fixed wages and higher bonus ratios.

Apart from CEOs, what about hedge fund managers? This time, scholars no longer use pilot’s licenses but compare fund managers who like to drive sports cars and minivans. The result shows that fund managers who drive sports cars generate 16.6% more volatility in returns than those who drive non-sports cars. Fund managers who drive minivans, meanwhile, managed to achieve 11.7% lower volatility than those who drive non-sports cars. Other fund managers who drive 7-seater cars or vehicles with higher safety ratings also tend to have relatively stable returns.

Hedge fund managers who drive sports cars, high horsepower, or high torque cars not only have higher volatility, but their risk-adjusted returns are also lower than those who drive relatively safe cars. Moreover, fund managers who drive sports cars are more likely to take shortcuts in regulatory requirements, ultimately failing to meet governance (G) requirements.

From this, it can be seen that to understand a company’s CEO or fund manager’s perspective on G, one not only needs to understand financial data like accounting but also seems to require an understanding of psychology.


This document is based on management forecasts and reflects prevailing conditions and our views as of this date, all of which are accordingly subject to change. In preparing this document, we have relied upon and assumed without independent verification, the accuracy and completeness of all information available from public sources. All opinions or estimates contained in this document are entirely Zeal Asset Management Limited’s judgment as of the date of this document and are subject to change without notice.

Investments involve risks. Past performance is not indicative of future performance. You may lose part or all of your investment. You should not make an investment decision solely based on this information. Each Fund may have different underlying investments and be exposed to a number of different risk, prior to investing, please read the offering documents of the respective funds for details, including risk factors. If you have any queries, please contact your financial advisor and seek professional advice. This material is issued by Zeal Asset Management Limited and has not been reviewed by the Securities and Futures Commission in Hong Kong.

There can be no assurance that any estimates of future performance of any industry, security or security class discussed in this presentation can be achieved. The portfolio may or may not have current investments in the industry, security or security class discussed. Any reference or inference to a specific industry or company listed herein does not constitute a recommendation to buy, sell, or hold securities of such industry or company. Please be advised that any estimates of future performance of any industry, security or security class discussed are subject to change at any time and are current as of the date of this presentation only. Targets are objectives only and should not be construed as providing any assurance or guarantee as to the results that may be realized in the future from investments in any industry, asset or asset class described herein.

In respect of any discrepancy between the English and Chinese version, the English version shall prevail.