Superstitious CEOs

The beauty about my job is that I get to see all kinds of beautifully weird and crazy things happening. From negative oil prices to the Gamestop frenzy, every time I think I have seen it all, something else comes around to astonish and perplex me.

And while I am not surprised that some corporate executives are superstitious it does astonish me that their superstitions can have a measurable impact on the companies they run. Jiarong Li and his colleagues examined 63,778 Chinese companies (State-owned enterprises were excluded) and the Chinese zodiac of the chairperson. Belief in horoscopes and the luck of one’s sign is widespread in China unlike Western zodiacs, star signs don’t change every month, but every year. Furthermore, Chinese people believe that if they are in the year of their own sign, it is going to be a particularly unlucky year in their personal life and their career. That means that in any given year, 1/12th of the Chinese population (because there are 12 signs in the Chinese zodiac) is in an “unlucky year”. And because the star sign of any person is random, this amounts to a random selection of people who believe in any given year to be unlucky.

If you happen to believe to be unlucky next year and happen to run a business, you would be forgiven to become more risk averse in your business decisions. And that is what can be observed empirically. Chinese companies tend to increase their cash holdings on the balance sheet starting about a quarter before the unlucky year for the chairperson begins. As the year progresses, cash levels for these companies stay high and only start to decline towards the fourth quarter of the unlucky year.

Excess cash holdings in unlucky years

Li et al. (2021). Note: *, **, *** indicate statistical significance at 10%, 5%, and 1%, respectively.

The next Chinese new year will be on 1 February 2022, so right about now, the companies run by chairpersons with that star sign will start to become more defensive and hold more cash. And by coincidence, next year is the year of the Tiger and I happen to be a Tiger as well. So maybe I should start to hold more cash as well and prepare for an unlucky year…