This study examines the effect of fund managers’ crash experience on their risk-taking behaviors. Using China’s 2007–2008 and 2014–2015 A-share market crashes, as well as the COVID-19 pandemic, as exogenous shocks, we find that managers with crash experiences significantly increased their overall risk-taking. We explain these findings using the lens of risk components, asset allocation, portfolio concentration, and incentive mechanisms. We also find that incentive mechanisms encourage these managers to take on greater risks and adopt more aggressive strategies, including increasing portfolio concentration and expanding securities holdings. These findings enrich behavioral finance theories on fund managers and provide insights for regulators to design more effective incentives and manage risk in the post-crisis periods.
Fang et al. (2026) studied this question.