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CEO early life experiences and cash holding: Evidence from China's great famine

Author

Listed:
  • Hu, Jun
  • Li, Antai
  • Luo, Yonggen

Abstract

This paper examines the relationship between famine-experienced CEO and cash holding behavior. We show that CEOs experienced great famine (1959–1961) hold higher level of cash. The effect is working through increasing cash sensitivity, suggesting that those CEOs immediately to retain cash from operation. The results are weaker in the CEOs who works in SOE, with higher education background and in those experiences economic reform. While, the effect is stronger in the CEOs who experiences political uncertainty. In terms of economic consequences, we find that firms governed by famine experienced CEOs have lower market value. However, during the crisis, firms governed by famine-experienced CEOs have higher market value and perform better. We argue that capital expenditure of those firms is higher and less likely to be affected by financial crisis. The results are consistent in various robustness checks and endogenous tests.

Suggested Citation

  • Hu, Jun & Li, Antai & Luo, Yonggen, 2019. "CEO early life experiences and cash holding: Evidence from China's great famine," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:pacfin:v:57:y:2019:i:c:s0927538x19301271
    DOI: 10.1016/j.pacfin.2019.101184
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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