Valuing DiversityCEOs Career Experiences and Corporate Investment.docx
- 文档编号:8766666
- 上传时间:2023-02-01
- 格式:DOCX
- 页数:50
- 大小:74.21KB
Valuing DiversityCEOs Career Experiences and Corporate Investment.docx
《Valuing DiversityCEOs Career Experiences and Corporate Investment.docx》由会员分享,可在线阅读,更多相关《Valuing DiversityCEOs Career Experiences and Corporate Investment.docx(50页珍藏版)》请在冰豆网上搜索。
ValuingDiversityCEOsCareerExperiencesandCorporateInvestment
ValuingDiversity:
CEOs’CareerExperiencesandCorporateInvestment
ConghuiHuaYu-JaneLiub
aUniversityofInternationalBusinessandEconomics,China
bPekingUniversity,China
Abstract.ThispaperinvestigatestheimpactofCEOs’careerexperiencesoncorporateinvestmentdecisions.WehypothesizethatCEOswithmorediversecareerexperiencesarelesslikelytobeconstrainedbyinsufficientinternalcapital.ThepotentialmechanismisthatrichexternalexperienceshelpCEOsaccumulatesocialconnectionsandtheseconnectionsmitigateinformationasymmetryandleadtobetteraccesstoexternalfunds.Consistentwiththisargument,wefindthatfirmswithCEOswhohavemorediversecareerexperiencesexhibitlowerinvestment-cashflowsensitivityandexploitmoreoutsidefunds,includingbothbankloansandtradecredit.Theseeffectsaremorepronouncedamongfinanciallyconstrainedfirms.Evencontrollingforconnectionsgainedthroughfinancialinstitutionsorgovernmentoffices,theeffectofdiversitystillremainsverystrong.Finally,weconductseveralteststomitigatetheconcernthatourresultsaredrivenbytheendogeneityofCEOs’appointments.
Keywords:
CEO,CareerExperiences,CorporateInvestment,FinancialConstraint,socialconnections
JELClassification:
G31G32G39
1.Introduction
Recently,financialeconomistshavestartedtoacknowledgetheinfluenceofmanager-specificattributesonfirmbehaviors.BertrandandSchoar(2003)documentthatamanager’sfixedeffectsareimportantdeterminantsofawiderangeofcorporatedecisions.Inspiredbytheirwork,thefollowingstudiesinvestigatehowmanagerialcharacteristics,typicallypsychologicalfactorssuchasoverconfidenceandpersonalriskattitudes,shapecorporatefinancialdecisionsandaffectfirmvalue.
Practically,studiesinmanagementfields(e.g.HambrickandMason,1984)havelongrecognizedtheimpactofmanagerialcharacteristicsonorganizationaloutcomes.Hambrick(2007)claimsmanagers’experiences,values,andpersonalitiesgreatlyinfluencetheirinterpretationsofthesituationstheyfaceand,inturn,affecttheirchoices.Managerscarrywhattheyhavehadduringtheircareersaspartoftheircognitiveandemotionalgivens.Thegivensservetofilteranddistortthedecisionmaker’sperceptionofaparticularsituationandhowitshouldbehandled.Therefore,careerexperiencescanbeexpectedtohaveasignificanteffectonthetypesofactionstakenbyamanager.Afewrecentstudiesinfinanceshiftthefocustowardsmanagers’careers.Forinstance,industry-specificexperiencesmatterforsuccessfulacquisitions(CustódioandMetzger,2013)andcorporatedivesturedecisions(Huang,2014).GeneralmanagerialskillsbasedonpastworkexperiencesisanimportantdeterminantofCEOpay(Custódio,Ferreira,andMatos,2013).However,evidenceisstillscantontheeffectofmanagers’careerexperiences.
ThispaperaimstoexploretheroleofCEOs’careerexperiencesincorporateinvestmentandfinancingdecisions.Wearguethatdiversecareerexperienceshelptoaccumulatesocialconnections.Thesesocialconnectionscanmitigateinformationasymmetryandleadtobetteraccesstooutsidecapitalandlessdependenceoninternalfunds.Therefore,weproposethattheinvestmentsbyaCEOwithdiversecareerexperiencesarelesslikelytobeconstrainedbyinsufficientinternalfundsandarethuslesssensitivetointernalcashflowthaninvestmentsbyCEOswithlessdiversecareerexperiences.
Thereareseveralplausiblewaysthatsocialconnectionscanfacilitateafirm’saccesstoexternalfinancing.First,accordingtotheresource-basedview,socialconnectionsconstitutevaluableorganizationalresources(Granovetter,1985)becausetheybroadensourcesofinformationandimproveinformationquality,relevance,andtimeliness(AdlerandKwon,2002).DiverselyexperiencedCEOstendtoexpandafirm'saccessibleresourcesbyexploitingpersonalsocialconnections.Second,socialconnectionsbenefitfirmsthatseekfinancingfrombanksthroughthetransferofprivateinformationandpromotionofdistinguishedgovernancemechanisms(Uzzi,1999).ThiswouldencouragediverselyexperiencedCEOstoutilizeexternalfinancingwhenmakinginvestmentdecisions.Inaddition,thereputationofdiverselyexperiencedCEOsamongbankers,customers,andsupplierswillhelpfirmsobtainorretainbusinessrelationshipsandprovideindirectfinancialsupport,especiallywhentheyexperienceashortageofworkingcapital.Third,inanemergingmarketwhereformalinstitutionssuchaslawsandregulationsareweak,managersandfirmshavetoperformbasicfunctionsbythemselves.Thesefunctionsmightincludeobtainingmarketinformation,organizingresources,andenforcingcontracts(PengandLuo,2000).Therefore,weexpectthatinterpersonalconnectionsplayanimportantroleinobtainingexternalfinancingresourcesinemergingmarkets.
WeempiricallyinvestigatetheeffectofCEOs’careerexperiencesoncorporatefinancialdecisionsusingasampleofChinesefirms.Oursampleincludes563firmsand1,332CEOsfrom2000to2010.Wehand-collectedbiographicaldatafortheCEOsfromcorporateyearbooks,extractingdetailedinformationonallworkorganizationswheretheCEOwasemployedorservedbeforehe/sherosetohis/hercurrentposition.Specifically,weconstructtwolayersofmeasurestoexploretheeffectofCEOs’careerexperiences.Inordertorevealtheoveralldiversityofone’scareerexperiences,thefirstlayerofvariablesmeasuresthenumberofworkorganizations(danweiinChina)forwhichtheCEOhasworked.Oursampleconfirmsthatoveralldiversityisanimportantdimensionforcapturingthecross-sectionaldifferencesofCEOs’careerexperiences.ThesecondlayerofvariablesstratifiestheabstractdiversitymeasureintospecificcareerexperiencesbyconstructingdummyvariablestoindicatewhetheraCEOhascross-industryexperience,orexperienceingovernment,financialinstitutions,orresearchinstitutes.Thesevariablesaremotivatedtomanifesttheheterogeneouseffectsofcareerexperiences.
BeginningwithFazzari,Hubbard,andPetersen(1988),financeliteratureattributestheexistenceofinvestment-cashflowsensitivity(controllingforinvestmentopportunities)toimperfectionsinthecapitalmarketorinformationasymmetrybetweencorporateinsidersandcapitalmarkets.Thatis,expensiveexternalfinancingduetofinancingfrictionsmaypreventfirmsfrominvestingingoodprojectsduetoinsufficientinternalfunds.InordertoinvestigatewhetherCEOs’diversecareerexperiencesreducethefrictions,weaddtheoveralldiversitymeasureanditsinteractionwithcashflowtotheclassicinvestmentequation.Theresultsshowthatthecoefficientoftheinteractiontermisnegativelysignificant,indicatingthattheinvestmentsofCEOswhohavemorediversecareerexperiencesarelesssensitivetointernalcashflow.ThenegativerelationshipbetweenthediversityofCEOs’careerexperiencesandinvestment-cashflowsensitivityremainssignificantevenaftercontrollingforinvestmentopportunities,corporategovernance,otherobservableCEOcharacteristics,industrycharacteristics,andfirmfixedeffects.Furthermore,wefindconnectionsgainedthroughexperiencesingovernment,financialinstitutions,researchinstitutionsordifferentindustriesalsoreducefirms’dependenceoninternalfunds.Interestingly,theeffectofpoliticalconnectionsorfinancebackgroundissubstantiallyweakenedwhencontrollingfortheoveralldiversitymeasures,whereastheeffectofdiversityremainsverystrong.Thisfindingsuggeststhatoveralldiversityisabroadmeasureforcapturingconnectionsembodiedinvariouscareerexperiences.
Further,weinvestigatewhetherCEOs’careerexperiencesmattermorewhenfirmsarefacingfinancialconstraints.Byseparatingfirmsaccordingtoproxiesforfinancialconstraints(includingtheKZindex,afirm’stangibility,andtheratioofcredittoloans),wefindsupportingevidencethatthenegativerelationshipbetweenthediversityofCEOs’careerexperiencesandthesensitivityofinvestmenttocashflowisstrongeramongfinanciallyconstrainedfirms.ThisfindingindicatesthatconnectionsembodiedinCEOs’diversecareerexperiencesindeedmitigateafirm’sinformationasymmetryandfinancingfrictions.Inadditionalanalyses,wefindthatbothbankloansandtradecreditarepositivelyrelatedtoourmeasuresforCEOs’careerexperiencesandthattheseeffectsaremorestatisticallysignificantforfinanciallyconstrainedfirms.ThisevidencesuggeststhattheCEOswithmorediversecareerexperiencesaremorelikelytoexploitexternaldebtfinancing.
AkeyconcernforanyanalysisofCEOeffectsistheendogeneityofCEOappointments.Inparticular,causalitymaybethereverse,andfirms’financingconditionsmaydeterminetheirchoiceofCEO.Ourdetaileddataallowsustobetteraddresstheseconcernsinseveralways.
First,weidentifytheeffectofCEOs’careerexperiencesoncorporateinvestmentandfinancingdecisionsfromCEOturnoverevents.Comparedtopurelycross-sectionalstudies,thisstrategytendstobebetteratdistinguishingmanagerialinfluencesfromfirm-invariantcharacteristics,asitinfersmanagerialvaluefromdifferencesincorporatebehaviorswithinthesamefirm.AsimilarstrategyhasbeenwidelyusedinrecentstudiesonCEOinfluencesandcorporatepolicies(e.g.Malmendier,Tate,andYan,2011;Hirshleifer,Low,andTeoh,2012).Moreover,the11-yeartimeseriesprovidessufficientvariationinCEOs’careerexperiencestoidentifyCEOeffectsevenaftercontrollingforfirmfixedeffectsandtheirinteractionswithcash
- 配套讲稿:
如PPT文件的首页显示word图标,表示该PPT已包含配套word讲稿。双击word图标可打开word文档。
- 特殊限制:
部分文档作品中含有的国旗、国徽等图片,仅作为作品整体效果示例展示,禁止商用。设计者仅对作品中独创性部分享有著作权。
- 关 键 词:
- Valuing DiversityCEOs Career Experiences and Corporate Investment
![提示](https://static.bdocx.com/images/bang_tan.gif)
链接地址:https://www.bdocx.com/doc/8766666.html