Firm and CEO Characteristics as Determinants of Firm Risk: Evidence from the Industrial and Service Sectors of the Amman Stock Exchange

Abstract

This research paper examines the diverse influences of firms’ traits and CEOs’ characteristics on corporate risk, particularly among industrial and service companies listed on the Amman Stock Exchange, from 2015 to 2023. Using an analytical panel-data approach with 513 firm-year observations, the paper integrates multiple measures to assess companies’ risks, including stock-return volatility, market returns, capital losses, and accounting-based proxies. This statistical analysis considers the firm-specific features, such as size, leverage, profitability, and liquidity, alongside CEOs’ attributes, which involve age, tenure, education, gender, and duality. Grounded in a robust theoretical framework combining Agency Theory, Upper Echelons Theory, and the Resource-Based View, the research findings indicate that internal resources and managerial qualities can strongly influence risk-taking behavior. Empirical results also suggest that the largest and most profitable companies tend to exhibit the lowest risk levels, consistent with resource-based arguments. In contrast, higher leverage is associated with increased risk, underscoring the impact of financial structure on corporate performance. CEOs’ characteristics also matter, as they are closely associated with reduced risks, indicating that both theoretical knowledge and professional experience can steadily foster conservative strategic choices. These concluding interpretations proved reliable and consistent, maintaining robustness across various risk measures and sub-period analysis. This yielded valuable insights, offering practical implications for investors and corporate governance practitioners in the Jordanian business setting and beyond.