CEOs who lived through natural disasters between the ages of 5 and 15 are significantly more likely to favour public debt over bank loans – taking on more risk and less oversight in how they finance their companies, finds new research from Vlerick Business School, Sichuan Agricultural University, The University of Essex, and The University of Nottingham.

Natural disasters included earthquakes, volcanic eruptions, tsunamis, hurricanes, tornadoes, severe storms, floods, landslides, extreme temperatures and wildfires. Firms led by these trauma-experienced CEOs hold, on average, 13.6 per cent more public debt and 19.3 per cent less bank debt than their peers. The shift is driven by a preference for autonomy and a reduced tolerance for external monitoring – traits linked to early exposure to life-threatening uncertainty.

“ ‘What doesn’t kill you, makes you stronger, ’ and in the case of CEOs with early-life disaster experience, this often translates to an increased appetite for risk,” said Prof Thanos Verousis of Vlerick Business School, a co-author of the study. Unlike banks, which monitor borrowers closely through regular oversight, public bondholders are fragmented and less able to intervene.

“Higher risk typically demands more external financing and invites tighter monitoring from creditors. CEOs aware of this trade-off may strategically opt for public debt precisely because it enables greater capital access while avoiding the intense scrutiny and control that come with bank loans. CEOs shaped by early-life disasters appear to value independence over oversight, often in ways that align with risk-seeking behaviour and short-term opportunity maximisation.”

The researchers manually tracked the early-life experiences of 2,000+ US-born CEOs, cross-referencing disaster records with biographical data and corporate debt structures from over 3,500 firm-year observations.

Just 11.7 per cent of CEOs in the study had disaster exposure – but they drove statistically significant changes in firm debt structure, opting for public markets over monitored loans. CEOs who endured more severe disasters showed the biggest tilt toward public debt.

The effect is amplified in firms where CEOs already enjoy greater autonomy or face fewer consequences for risk-taking, such as those located near SEC offices, based in states with strong unemployment benefits, governed by co-opted boards, or facing especially restrictive bank loan covenants.

The study points to broader questions about how personal experiences shape financial decision-making – and what that means for corporate governance. “We’re not saying these CEOs are reckless,” Verousis added. “But boards and investors need to understand where their risk appetite comes from. Childhood trauma can leave a permanent mark, and it shows up in the balance sheet.”