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Pilot CEOs and trade credit

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  • Hongkang Xu
  • Duong Nguyen
  • Mai Dao

Abstract

By using a pilot license as a proxy for the sensation-seeking personality trait, we examine the relation between sensation-seeking CEOs and trade credit. With a sample of pilot CEOs and non-pilot CEOs from U.S. listed firms from 1993–2016, we find strong evidence that firms led by pilot CEOs are more likely to use trade credit than those led by non-pilot CEOs. The positive relation between pilot CEOs and trade credit is more pronounced for firms with high investment growth opportunities. The results are consistent with our conjecture that firms with pilot CEOs tend to have a higher level of trade credit, especially when they need capital to finance long-term investment activities to satisfy the CEOs’ desire for sensation. Our findings establish a link between a CEO personality trait and trade credit and suggest that this CEO personality trait might be a relevant factor in determining purchaser firms’ use of trade credit.

Suggested Citation

  • Hongkang Xu & Duong Nguyen & Mai Dao, 2021. "Pilot CEOs and trade credit," The European Journal of Finance, Taylor & Francis Journals, vol. 27(6), pages 486-509, April.
    • Handle: RePEc:taf:eurjfi:v:27:y:2021:i:6:p:486-509
    DOI: 10.1080/1351847X.2020.1816560
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    Cited by:

    1. Chen, Xiaomeng Charlene & Jones, Stewart & Hasan, Mostafa Monzur & Zhao, Ruoyun & Alam, Nurul, 2023. "Does strategic deviation influence firms’ use of supplier finance?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 85(C).
    2. Freund, Steven & Kovacs, Tunde & Nguyen, Nam H. & Phan, Hieu V., 2023. "CEO personality traits and debt contracting: Evidence from pilot CEOs," International Review of Financial Analysis, Elsevier, vol. 85(C).
    3. Sah, Nilesh B. & Banerjee, Anandi & Malm, James & Rahman, Anisur, 2022. "A good name is better than riches: Family firms and working capital management," Journal of Behavioral and Experimental Finance, Elsevier, vol. 33(C).
    4. Yuming Zhang & Han Liu & Shuang Li & Chao Xing, 2023. "The Digital Transformation Effect in Trade Credit Uptake: The Buyer Perspective," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(7), pages 2056-2078, May.
    5. Wang, Jianxin & Huang, Cailing & Xu, Lin & Zhang, Junhuan, 2023. "Drinking into friends: Alcohol drinking culture and CEO social connections," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 982-995.
    6. Mai Dao & Trung Pham & Hongkang Xu, 2022. "Internal control effectiveness and trade credit," Review of Quantitative Finance and Accounting, Springer, vol. 59(4), pages 1423-1452, November.

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