Celebrity chief executive officers (CEOs) do not necessarily take more business risks than other CEOs in the restaurant industry, but restaurants with celebrity CEOs can take more risks when celebrity status is combined with other factors, according to findings from researchers in the Penn State School of Hospitality Management.
The team found that restaurants with celebrity CEOs may exhibit more risk-taking behavior—in this case, the risks are financial and related to a restaurant's investments—when these CEOs are hired from outside the company or if the business is increasingly active in franchising. Led by Seoki Lee, professor of hospitality management at Penn State, the researchers published their findings in Tourism Economics.
In context of this research, a celebrity CEO is not necessarily a movie star or someone with international recognition, but rather someone who acquires a lot of media attention in tandem with their restaurant. The researchers determined celebrity CEO status by the number of media mentions that included both a CEO's and their company's name.
"This has been an underexplored topic in hospitality and restaurant management," Lee said. "When we think about the restaurant industry, we believe that this issue is more pronounced because CEOs in this industry exert more managerial discretion and have greater influence on strategic decisions and overall performance than CEOs in other industries."
To learn the impact of celebrity CEO status on risk-taking behavior in the restaurant industry, the researchers gathered data from FACTIVA, a business information and research platform, that included 51 unique publicly traded restaurant companies and 108 distinct CEOs within the United States.
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