Companies run by lawyers (who’s complacent?)

We looked at about 3,500 CEOs, about 9% of whom have law degrees. They were associated with nearly 2,400 publicly traded firms in the S&P 1500 from 1992 to 2012.


Companies run by lawyers behaved differently in several dimensions related to risk taking than those run by non-lawyers. CEOs with legal training tended to implement more-cautious earnings management policies, especially in industries with high litigation risk, like pharmaceuticals. One measure we used was current accruals, where managers accelerate recognition of revenues and delay recognition of expenses. Lawyers were much less aggressive in accrual accounting relative to industry levels.


We found that lawyer CEOs were not only associated with less litigation but, conditional on experiencing litigation, were also associated with better management of litigation.

That is all from M. Todd Henderson, more at the link.


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