Chief executive officers who prefer risky sports are also more likely to take a risky approach to tax planning, according to a new study published by the American Association of Accounting (AAA).

Shuqing Luo, co-author of the study and an associate professor of accounting at the University of Hong Kong, said in a news release that evidence in psychology studies indicated that sports hobbies reflected the personal risk preferences of the participants.

“We wanted to examine how a CEO's personal risk preferences, as reflected in the sports they enjoy, are also reflected in the tax planning of that CEO's company," he said. "CEOs can set the tone of a company's tax planning decisions, and many stakeholders are interested in the extent to which CEOs are willing to expose their companies to increased risk.”

To determine the correlation between the degree to which a CEO will take on sporting risks as compared to tax planning of a business, Luo and his team of researchers collected data on 732 CEOs of U.S. companies, which they compared with the nationwide sports injury rates to assess each sport’s risk level. For example, he said, windsurfing and motor sports were relatively riskier than jogging or boating.

The researchers used four measures to assess the extent to which each CEO's company was aggressive in tax planning, including the amount of tax each company paid relative to its profit, and whether the companies set up tax shelters.

Luo and his co-author of the study, Lirong Shi, an assistant professor of accounting at the University of Nottingham Mingbo, said that the researchers found that firms managed by CEOs with riskier sports as hobbies were more aggressive in their approach to tax planning as well.

"This association was particularly pronounced for CEOs who had greater financial incentives and greater decision-making power," Shi said.

The researchers asserted that the finding can be used by a wide array of business stakeholders, such as board members interviewing candidates for the position of CEO, and want to assess their risk preferences.

"Our work suggests that looking at a candidate's sports preferences can provide some insight into the candidate's risk preferences,” Luo said. “Similarly, investors, analysts, bankers, and others may be interested in having an additional means of assessing the risk preferences of a company's top executives.”

Luo said that the findings were also a valuable tool for auditors seeking to assess a client’s risk profile.