IDEAS home Printed from https://ideas.repec.org/a/gam/jijfss/v10y2022i2p34-d814132.html
   My bibliography  Save this article

Sentiment and Style: Evidence from Republican Managers

Author

Listed:
  • Serkan Karadas

    (College of Business and Management, University of Illinois Springfield, Springfield, IL 62703, USA)

  • Jorida Papakroni

    (Department of Business, Organizations, and Society, Franklin & Marshall College, Lancaster, PA 17603, USA)

  • Minh Tam Tammy Schlosky

    (College of Business and Management, University of Illinois Springfield, Springfield, IL 62703, USA)

Abstract

This study examines the relationship between corporate managers’ political ideology and corporate leverage policies conditional on investor sentiment. Based on a minimum of 21,884 observations over the 1992–2008 period, the authors show that Republican managers significantly reduce leverage during periods of high investor sentiment. To the best of the authors’ knowledge, this paper is the first to document that Republican managers are not swayed by the general tendency to increase leverage in high-sentiment periods. Overall, the empirical evidence from this study indicates that personal characteristics of managers have a consistent impact on corporate policies, providing support for the “behavioral consistency” theory. Further, the results of this study imply that internal and external stakeholders of a corporation should take into account manager personality in their decisions. For example, the board of a highly indebted company may consider hiring a conservative manager to reduce its financial risk.

Suggested Citation

  • Serkan Karadas & Jorida Papakroni & Minh Tam Tammy Schlosky, 2022. "Sentiment and Style: Evidence from Republican Managers," IJFS, MDPI, vol. 10(2), pages 1-17, May.
    • Handle: RePEc:gam:jijfss:v:10:y:2022:i:2:p:34-:d:814132
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7072/10/2/34/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7072/10/2/34/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Unsal, Omer & Hassan, M. Kabir & Zirek, Duygu, 2016. "Corporate lobbying, CEO political ideology and firm performance," Journal of Corporate Finance, Elsevier, vol. 38(C), pages 126-149.
    2. Titman, Sheridan & Wessels, Roberto, 1988. " The Determinants of Capital Structure Choice," Journal of Finance, American Finance Association, vol. 43(1), pages 1-19, March.
    3. Chyz, James A., 2013. "Personally tax aggressive executives and corporate tax sheltering," Journal of Accounting and Economics, Elsevier, vol. 56(2), pages 311-328.
    4. Baker, Malcolm & Wurgler, Jeffrey, 2013. "Behavioral Corporate Finance: An Updated Survey," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 357-424, Elsevier.
    5. Amir Rubin, 2008. "Political Views and Corporate Decision Making: The Case of Corporate Social Responsibility," The Financial Review, Eastern Finance Association, vol. 43(3), pages 337-360, August.
    6. R. David Mclean & Mengxin Zhao, 2014. "The Business Cycle, Investor Sentiment, and Costly External Finance," Journal of Finance, American Finance Association, vol. 69(3), pages 1377-1409, June.
    7. Malcolm Baker & Jeffrey Wurgler, 2002. "Market Timing and Capital Structure," Journal of Finance, American Finance Association, vol. 57(1), pages 1-32, February.
    8. John R. Graham & Si Li & Jiaping Qiu, 2012. "Managerial Attributes and Executive Compensation," The Review of Financial Studies, Society for Financial Studies, vol. 25(1), pages 144-186.
    9. Malcolm Baker & Jeffrey Wurgler, 2007. "Investor Sentiment in the Stock Market," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 129-152, Spring.
    10. Stambaugh, Robert F. & Yu, Jianfeng & Yuan, Yu, 2012. "The short of it: Investor sentiment and anomalies," Journal of Financial Economics, Elsevier, vol. 104(2), pages 288-302.
    11. Grundy, Bruce D. & Li, Hui, 2010. "Investor sentiment, executive compensation, and corporate investment," Journal of Banking & Finance, Elsevier, vol. 34(10), pages 2439-2449, October.
    12. Kaustia, Markku & Torstila, Sami, 2011. "Stock market aversion? Political preferences and stock market participation," Journal of Financial Economics, Elsevier, vol. 100(1), pages 98-112, April.
    Full references (including those not matched with items on IDEAS)

    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. Kim, Donghan & Kim, Jun Sik & Seo, Sung Won, 2018. "What options to trade and when: Evidence from seasoned equity offerings," Journal of Financial Markets, Elsevier, vol. 37(C), pages 70-96.
    2. Hao, Ying & Chou, Robin K. & Ko, Kuan-Cheng & Yang, Nien-Tzu, 2018. "The 52-week high, momentum, and investor sentiment," International Review of Financial Analysis, Elsevier, vol. 57(C), pages 167-183.
    3. Erasmo Giambona & Rafael Matta & José-Luis Peydró & Ye Wang, 2020. "Quantitative easing, investment, and safe assets: the corporate-bond lending channel," Economics Working Papers 1722, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2020.
    4. Avramov, Doron & Li, Minwen & Wang, Hao, 2021. "Predicting corporate policies using downside risk: A machine learning approach," Journal of Empirical Finance, Elsevier, vol. 63(C), pages 1-26.
    5. Mian, G. Mujtaba & Sharma, Piyush & Gul, Ferdinand A., 2018. "Investor sentiment and advertising expenditure," International Journal of Research in Marketing, Elsevier, vol. 35(4), pages 611-627.
    6. Biljana N. Adebambo & Xuemin (Sterling) Yan, 2018. "Investor Overconfidence, Firm Valuation, and Corporate Decisions," Management Science, INFORMS, vol. 64(11), pages 5349-5369, November.
    7. Ding Du & Ronald J Gunderson & Xiaobing Zhao, 2016. "Investor sentiment and oil prices," Journal of Asset Management, Palgrave Macmillan, vol. 17(2), pages 73-88, March.
    8. Vogt, Jan, 2021. "Managerial market timing: What is the pot size for long-term shareholders assuming firm management acts in their best interest and does have an informational advantage?," Global Finance Journal, Elsevier, vol. 49(C).
    9. Jing Shi & Marcel Ausloos & Tingting Zhu, 2022. "If global or local investor sentiments are prone to developing an impact on stock returns, is there an industry effect?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1309-1320, January.
    10. Ahmed, Huson Joher Ali & Azad, A.S.M. Sohel & Poon, Wai Ching & Safiullah, Md, 2023. "Is there a CSI-leverage nexus?," International Review of Financial Analysis, Elsevier, vol. 89(C).
    11. Ding Du & Xiaobing Zhao, 2017. "Financial investor sentiment and the boom/bust in oil prices during 2003–2008," Review of Quantitative Finance and Accounting, Springer, vol. 48(2), pages 331-361, February.
    12. Ding Du & Ou Hu, 2020. "Why does stock-market investor sentiment influence corporate investment?," Review of Quantitative Finance and Accounting, Springer, vol. 54(4), pages 1221-1246, May.
    13. Szymon Lis, 2022. "Investor Sentiment in Asset Pricing Models: A Review," Working Papers 2022-14, Faculty of Economic Sciences, University of Warsaw.
    14. Vogt, Jan, 2023. "Managerial market timing under credit risk: How do timed buybacks and stock issuances influence the value of long-term shareholders?," Global Finance Journal, Elsevier, vol. 55(C).
    15. Bebel, Arkadiusz, 2014. "Low Versus High Leverage (LVH)," MPRA Paper 62889, University Library of Munich, Germany, revised 08 Nov 2014.
    16. Guo, Haifeng & Hung, Chi-Hsiou D. & Kontonikas, Alexandros, 2022. "The Fed and the stock market: A tale of sentiment states," Journal of International Money and Finance, Elsevier, vol. 128(C).
    17. Montone, Maurizio, 2022. "Does the U.S. president affect the stock market?," Journal of Financial Markets, Elsevier, vol. 61(C).
    18. Paul Borochin & Jie Yang, 2016. "Options, Equity Risks, and the Value of Capital Structure Adjustments," Finance and Economics Discussion Series 2016-097, Board of Governors of the Federal Reserve System (U.S.).
    19. Ahsan Habib & Mostafa Monzur Hasan, 2017. "Firm life cycle, corporate risk-taking and investor sentiment," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(2), pages 465-497, June.
    20. Dittmann, Ingolf & Montone, Maurizio & Zhu, Yuhao, 2023. "Wage gap and stock returns: Do investors dislike pay inequality?," Journal of Corporate Finance, Elsevier, vol. 78(C).

    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:gam:jijfss:v:10:y:2022:i:2:p:34-:d:814132. 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: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    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.