Managerial conservatism and corporate policies

Kiet Tuan Duong, Chiara Banti and Norvald Instefjord

Journal of Corporate Finance, 2021, vol. 68, issue C

Abstract: This paper investigates how conservative managers make corporate decisions. Motivated by psychology research, we use handwritten signatures (i.e., emotionally restraint disclosure styles) as a proxy for CEO conservatism. We find that firms with conservative CEOs engage more with safer investments (capital expenditures), engage less with risky policies (Research & Development expenses and debt financing), hold more cash, are less likely to pay cash dividends, and more likely to use stock repurchase schemes. We use the same proxy for CFO conservatism. We find that CFO conservatism is a better determinant than CEO conservatism for cash holding and financing policies, but the reverse is true for investment policies. Conservative CFOs prefer long-term debt to short-term debt.

Keywords: CEO conservatism; CFO conservatism; Corporate policies; Signature style (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:68:y:2021:i:c:s0929119921000948

DOI: 10.1016/j.jcorpfin.2021.101973

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