IDEAS home Printed from https://ideas.repec.org/a/bla/ausact/v31y2021i3p186-212.html
   My bibliography  Save this article

The Early‐life Political Event Experience of the Chair of the Board and the Firm's Innovation Decision

Author

Listed:
  • Donghua Zhou
  • Min Bai
  • Xiaoqin Liang
  • Yafeng Qin

Abstract

Early life experience may influence an executive's psychology and behaviour, which affects the company's financial policy. Using a unique early life political event, this paper finds that the ‘Down to the Countryside’ experience of board chairs in China increases their risk aversion and reduces the firms’ innovation investments. Such an effect is robust to a series of alternative tests. Further analysis shows that this impact is not weakened by chairs’ higher education, and their increased risk aversion results in the chairs being more prudent and making more efficient investment decisions.

Suggested Citation

  • Donghua Zhou & Min Bai & Xiaoqin Liang & Yafeng Qin, 2021. "The Early‐life Political Event Experience of the Chair of the Board and the Firm's Innovation Decision," Australian Accounting Review, CPA Australia, vol. 31(3), pages 186-212, September.
    • Handle: RePEc:bla:ausact:v:31:y:2021:i:3:p:186-212
    DOI: 10.1111/auar.12331
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/auar.12331
    Download Restriction: no
    File URL: https://libkey.io/10.1111/auar.12331?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Zhang, Guochang, 1998. "Ownership concentration, risk aversion and the effect of financial structure on investment decisions," European Economic Review, Elsevier, vol. 42(9), pages 1751-1778, November.
    2. Michael A. Hitt & Beverly B. Tyler, 1991. "Strategic decision models: Integrating different perspectives," Strategic Management Journal, Wiley Blackwell, vol. 12(5), pages 327-351, July.
    3. Sunder, Jayanthi & Sunder, Shyam V. & Zhang, Jingjing, 2017. "Pilot CEOs and corporate innovation," Journal of Financial Economics, Elsevier, vol. 123(1), pages 209-224.
    4. Ulrike Malmendier & Stefan Nagel, 2011. "Depression Babies: Do Macroeconomic Experiences Affect Risk Taking?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(1), pages 373-416.
    5. Chen, Gongmeng & Firth, Michael & Gao, Daniel N. & Rui, Oliver M., 2006. "Ownership structure, corporate governance, and fraud: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 12(3), pages 424-448, June.
    6. Anisya S. Thomas & Robert J. Litschert & Kannan Ramaswamy, 1991. "The performance impact of strategy ‐ manager coalignment: An empirical examination," Strategic Management Journal, Wiley Blackwell, vol. 12(7), pages 509-522, October.
    7. repec:bla:jfinan:v:59:y:2004:i:4:p:1777-1804 is not listed on IDEAS
    8. Yuan, Rongli & Wen, Wen, 2018. "Managerial foreign experience and corporate innovation," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 752-770.
    9. James G. March & Zur Shapira, 1987. "Managerial Perspectives on Risk and Risk Taking," Management Science, INFORMS, vol. 33(11), pages 1404-1418, November.
    10. Karen A. Bantel & Susan E. Jackson, 1989. "Top management and innovations in banking: Does the composition of the top team make a difference?," Strategic Management Journal, Wiley Blackwell, vol. 10(S1), pages 107-124, June.
    11. Gennaro Bernile & Vineet Bhagwat & P. Raghavendra Rau, 2017. "What Doesn't Kill You Will Only Make You More Risk-Loving: Early-Life Disasters and CEO Behavior," Journal of Finance, American Finance Association, vol. 72(1), pages 167-206, February.
    12. Ulrike Malmendier & Geoffrey Tate & Jon Yan, 2011. "Overconfidence and Early‐Life Experiences: The Effect of Managerial Traits on Corporate Financial Policies," Journal of Finance, American Finance Association, vol. 66(5), pages 1687-1733, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yan, Kai & Chen, Zhiwu & Wang, Jingang & Wang, Peipei & Liang, Weiming, 2023. "The power from folk monitoring: Leading Officials’ Natural Resources Accountability Audit (NRAA) and corporate ESG performance," Finance Research Letters, Elsevier, vol. 58(PC).
    2. Chen, Zhiwu & Cao, Yuqiang & Feng, Zhuoan & Lu, Meiting & Shan, Yaowen, 2023. "Broadband infrastructure and stock price crash risk: Evidence from a quasi-natural experiment," Finance Research Letters, Elsevier, vol. 58(PA).
    3. Cao, Yuqiang & Li, Chenglin & Liu, Xinghe & Lu, Meiting & Shan, Yaowen, 2022. "Economic policy uncertainty and debt allocation within business groups," Economic Modelling, Elsevier, vol. 116(C).
    4. Li, Jianan & Tsang, Eric W.K., 2025. "Imprinting effects of childhood resource-scarcity experience on CEO-TMT interface: Political and market resource strategies," Journal of Business Research, Elsevier, vol. 189(C).
    5. Maoli Ji & Yuguang Ji & Shulan Dong, 2022. "Environmental Accounting Information Disclosure Driving Factors: The Case of Listed Firms in China," Sustainability, MDPI, vol. 14(23), pages 1-23, November.
    6. Huacheng Rao & Dongxu Chen & Feichao Shen & Yangyang Shen, 2022. "Can Green Bonds Stimulate Green Innovation in Enterprises? Evidence from China," Sustainability, MDPI, vol. 14(23), pages 1-19, November.
    7. Deli Wang & Ke Peng & Kaiye Tang & Yewei Wu, 2022. "Does Fintech Development Enhance Corporate ESG Performance? Evidence from an Emerging Market," Sustainability, MDPI, vol. 14(24), pages 1-21, December.
    8. Xijia Huang & Yiting Guo & Yuming Lin & Liping Liu & Kai Yan, 2022. "Green Loans and Green Innovations: Evidence from China’s Equator Principles Banks," Sustainability, MDPI, vol. 14(20), pages 1-20, October.
    9. Qian Liu & Yiheng You, 2023. "FinTech and Green Credit Development—Evidence from China," Sustainability, MDPI, vol. 15(7), pages 1-23, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Xue, Fei & Wang, Xin & Xie, Yan & Zhang, Weihua, 2022. "Does CEO's early life experience affect corporate bond yield spread? Evidence from China's great famine," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 1012-1024.
    2. Su, Zhong-qin & Xu, Yuyang & Xiao, Zuoping & Fung, Hung-Gay, 2020. "Directors’ prior life experience and corporate donations: Evidence from China," The North American Journal of Economics and Finance, Elsevier, vol. 53(C).
    3. Clark Liu & Johan Sulaeman & Tao Shu & P Eric Yeung, 2023. "Life is Too Short? Bereaved Managers and Investment Decisions," Review of Finance, European Finance Association, vol. 27(4), pages 1373-1421.
    4. Chen, Jie & Lasfer, Meziane & Song, Wei & Zhou, Si, 2021. "Recession managers and mutual fund performance," Journal of Corporate Finance, Elsevier, vol. 69(C).
    5. Syed Tauseef Ali & Joseph H. Zhang & Farman Ali & Misraku Molla Ayalew & Muhammad Ullah, 2024. "Ideological Imprints and Corporate Innovation: Evidence from China," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 1029-1068, March.
    6. Han, Yu & Chi, Wei & Zhou, Jinyi, 2022. "Prosocial imprint: CEO childhood famine experience and corporate philanthropic donation," Journal of Business Research, Elsevier, vol. 139(C), pages 1604-1618.
    7. Ju, Xiaosheng & Jiang, Shengjun & Zhao, Qifeng, 2023. "Innovation effects of academic executives: Evidence from China," Research Policy, Elsevier, vol. 52(3).
    8. repec:zbw:bofitp:2020_015 is not listed on IDEAS
    9. Nadia Loukil & Ouidad Yousfi, 2022. "Do CEO’s traits matter in innovation outcomes?," Journal of International Entrepreneurship, Springer, vol. 20(3), pages 375-403, September.
    10. Liwei Shan & Albert Tsang & Xiaoxue Zhang, 2024. "Transporting Audit Quality Across Countries: Returnee CEOs and Audit Fees," Journal of Business Ethics, Springer, vol. 192(4), pages 845-874, July.
    11. Jin, Miao & Liu, Yu-Jane & Meng, Juanjuan, 2019. "Fat-finger event and risk-taking behavior," Journal of Empirical Finance, Elsevier, vol. 53(C), pages 126-143.
    12. Gopalan, Radhakrishnan & Gormley, Todd A. & Kalda, Ankit, 2021. "It’s not so bad: Director bankruptcy experience and corporate risk-taking," Journal of Financial Economics, Elsevier, vol. 142(1), pages 261-292.
    13. Wen, Chufu & Zhao, Xinyu & Xu, Longhao & Yin, Hua, 2023. "Military experience and household stock market participation: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 86(C).
    14. Guo, Junru & He, Jia & Liu, Sibo & Wang, Yonglin, 2025. "CEO relative age at school entry and corporate risk-taking," Journal of Banking & Finance, Elsevier, vol. 176(C).
    15. Haliassos, Michael & Jansson, Thomas & Karabulut, Yigitcan, 2021. "Wealth inequality: Opportunity or unfairness?," IMFS Working Paper Series 161, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    16. Hong Ru & Endong Yang & Kunru Zou, 2021. "Combating the COVID-19 Pandemic: The Role of the SARS Imprint," Management Science, INFORMS, vol. 67(9), pages 5606-5615, September.
    17. Leonardo M. Klüppel & Lamar Pierce & Jason A. Snyder, 2018. "Perspective—The Deep Historical Roots of Organization and Strategy: Traumatic Shocks, Culture, and Institutions," Organization Science, INFORMS, vol. 29(4), pages 702-721, August.
    18. Theresa S. Cho & Donald C. Hambrick, 2006. "Attention as the Mediator Between Top Management Team Characteristics and Strategic Change: The Case of Airline Deregulation," Organization Science, INFORMS, vol. 17(4), pages 453-469, August.
    19. Shouyu Yao & Zhuoqun Wang & Mengyue Sun & Jing Liao & Feiyang Cheng, 2020. "Top executives’ early‐life experience and financial disclosure quality: impact from the Great Chinese Famine," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(5), pages 4757-4793, December.
    20. Liu, Guangqiang & Xie, Ziqin & Li, Ming, 2023. "Does economics and management education make managers more cautious? Evidence from R&D of Chinese listed firms," Research in International Business and Finance, Elsevier, vol. 64(C).
    21. Qing Wan & Xiaoke Cheng & Kam C. Chan & Shenghao Gao, 2021. "Born to innovate? The birth‐order effect of CEOs on corporate innovation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(9-10), pages 1846-1888, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ausact:v:31:y:2021:i:3:p:186-212. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1035-6908 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.