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Military CEOs

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  • Benmelech, Efraim
  • Frydman, Carola

Abstract

There is mounting evidence of the influence of personal characteristics of chief executive officers (CEOs) on corporate outcomes. In this paper we analyze the relation between military service of CEOs and managerial decisions, financial policies, and corporate outcomes. Exploiting exogenous variation in the propensity to serve in the military, we show that military service is associated with conservative corporate policies and ethical behavior. Military CEOs pursue lower corporate investment, are less likely to be involved in corporate fraudulent activity, and perform better during industry downturns. Taken together, our results show that military service has significant explanatory power for managerial decisions and firm outcomes.

Suggested Citation

  • Benmelech, Efraim & Frydman, Carola, 2015. "Military CEOs," Journal of Financial Economics, Elsevier, vol. 117(1), pages 43-59.
  • Handle: RePEc:eee:jfinec:v:117:y:2015:i:1:p:43-59
    DOI: 10.1016/j.jfineco.2014.04.009
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    Cited by:

    1. Dora L. Costa, 2014. "Leaders: Privilege, Sacrifice, Opportunity, and Personnel Economics in the American Civil War," Journal of Law, Economics, and Organization, Oxford University Press, vol. 30(3), pages 437-462.
    2. Andrew Ellul & Marco Pagano & Annalisa Scognamiglio, 2017. "Career Risk and Market Discipline in Asset Management," CSEF Working Papers 489, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Mar 2019.
    3. Limbach, Peter & Sonnenburg, Florian, 2015. "Does CEO fitness matter?," CFR Working Papers 14-12 [rev.3], University of Cologne, Centre for Financial Research (CFR).
    4. Sunder, Jayanthi & Sunder, Shyam V. & Zhang, Jingjing, 2017. "Pilot CEOs and corporate innovation," Journal of Financial Economics, Elsevier, vol. 123(1), pages 209-224.
    5. Yi Fan, 2017. "Does Adversity Affect Long-Term Consumption and Financial Behaviour? Evidence from China's Rustication Programme," ERES eres2017_148, European Real Estate Society (ERES).
    6. King, Timothy & Srivastav, Abhishek & Williams, Jonathan, 2016. "What's in an education? Implications of CEO education for bank performance," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 287-308.
    7. repec:eee:jfinec:v:126:y:2017:i:3:p:543-562 is not listed on IDEAS
    8. repec:eee:corfin:v:48:y:2018:i:c:p:638-657 is not listed on IDEAS
    9. Erik Grönqvist & Erik Lindqvist, 2016. "The Making of a Manager: Evidence from Military Officer Training," Journal of Labor Economics, University of Chicago Press, vol. 34(4), pages 869-898.
    10. repec:eee:pacfin:v:46:y:2017:i:pa:p:57-77 is not listed on IDEAS
    11. Adams, Renée & Keloharju, Matti & Knüpfer, Samuli, 2018. "Are CEOs born leaders? Lessons from traits of a million individuals," Journal of Financial Economics, Elsevier, vol. 130(2), pages 392-408.
    12. Vojislav Maksimovic & Gordon M. Phillips & Liu Yang, 2017. "Do Public Firms Respond to Investment Opportunities More than Private Firms? The Impact of Initial Firm Quality," NBER Working Papers 24104, National Bureau of Economic Research, Inc.
    13. Jacobs, Sofie & Cambré, Bart & Huysentruyt, Marieke & Schramme, Annick, 2016. "Multiple pathways to success in small creative businesses: The case of Belgian furniture designers," Journal of Business Research, Elsevier, vol. 69(11), pages 5461-5466.
    14. Faccio, Mara & Marchica, Maria-Teresa & Mura, Roberto, 2016. "CEO gender, corporate risk-taking, and the efficiency of capital allocation," Journal of Corporate Finance, Elsevier, vol. 39(C), pages 193-209.
    15. repec:eee:jfinec:v:126:y:2017:i:1:p:97-121 is not listed on IDEAS
    16. Limbach, Peter & Sonnenburg, Florian, 2014. "CEO fitness and firm value," CFR Working Papers 14-12 [rev.], University of Cologne, Centre for Financial Research (CFR).
    17. Kelvin K. F. Law & Lillian F. Mills, 2017. "Military experience and corporate tax avoidance," Review of Accounting Studies, Springer, vol. 22(1), pages 141-184, March.
    18. Feng, Xunan & Johansson, Anders C., 2018. "Living through the Great Chinese Famine: Early-life experiences and managerial decisions," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 638-657.
    19. Ian D. Gow & Steven N. Kaplan & David F. Larcker & Anastasia A. Zakolyukina, 2016. "CEO Personality and Firm Policies," NBER Working Papers 22435, National Bureau of Economic Research, Inc.
    20. Petr Houdek & Petr Koblovský, 2016. "Behavioural Finance and Organisations: A Review," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2016(2), pages 33-45.
    21. Limbach, Peter & Sonnenburg, Florian, 2014. "CEO fitness and firm value," CFR Working Papers 14-12, University of Cologne, Centre for Financial Research (CFR).
    22. Steven N. Kaplan & Morten Sorensen, 2017. "Are CEOs Different? Characteristics of Top Managers," NBER Working Papers 23832, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    CEOs; Fraud; Military; Ethics; Corporate Governance;

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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