CEO's career diversification and corporate financial policies: Evidence from Taiwan
Date Issued
2015
Date
2015
Author(s)
Huang, Ko-Jung
Abstract
This study examines the effects of CEO’s career experiences on corporate policies, including investment decision and financing decision. We use data of listed companies in the electronic industry in Taiwan Stock Exchange from 2004 to 2014. The main results show that (i) CEOs who have more diversified career experiences are less likely to be limited by insufficient internal capital. (ii) Firms with CEOs who have more diversified career experiences exploit more outside funds, including both financial institutions loans and trade credit payables. These effects are more pronounced in financially constrained companies. Overall, our findings indicate that sufficient external experiences are beneficial for CEOs to accumulate their own social connection which alleviates the information asymmetry and brings the better access to external financing. Therefore, those experiences can help firms to be less dependent on internal capital, and thus lower investment cash flow sensitivity.
Subjects
CEO Career Diversification
Financial Constraint
Investment Cash Flow Sensitivity
Internal and External Financing
Type
thesis
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