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Firstborn CEOs and credit ratings

Author

Listed:
  • Park, June Woo
  • Nam, Giseok
  • Tsang, Albert
  • Lee, Yung-Jae

Abstract

Our study examines whether CEOs’ birth order can predict firms’ credit ratings. Consistent with studies that document a positive relationship in the general population between being firstborn and being conservative, our study finds that firms managed by firstborn CEOs tend to have higher credit ratings than those managed by later-born CEOs. Our results are robust to controlling for additional personal CEO traits, such as political identity, and to using a propensity score matching sample. A change analysis supports the causality of the firstborn effect. We suggest that return on assets and free cash flow are possible channels through which firstborn status affects credit ratings. Cross-sectional analyses show that the positive association is less (more) pronounced for firstborn CEOs who have a pilot license (run firms in less competitive industries). These results suggest that managerial conservatism may be an important factor in credit rating agencies’ credit risk assessments.

Suggested Citation

  • Park, June Woo & Nam, Giseok & Tsang, Albert & Lee, Yung-Jae, 2022. "Firstborn CEOs and credit ratings," The British Accounting Review, Elsevier, vol. 54(4).
    • Handle: RePEc:eee:bracre:v:54:y:2022:i:4:s0890838922000129
    DOI: 10.1016/j.bar.2022.101083
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