Subordinate executives' horizon and firm policies

Mohamed Mekhaimer, Alex Annan Abakah, Awad Ibrahim and Khaled Hussainey ()

Journal of Corporate Finance, 2022, vol. 74, issue C

Abstract: Motivated by the internal governance theory, we investigate the links between subordinate executives' horizon and firm policies. Using the number of years to retirement to capture subordinate executives' horizon inside the firm, we find that subordinates' horizon is positively associated with firm's risk-taking, long-term investments growth, and research and development productivity, but negatively related to the dividend decision and the payout ratio. We also find a positive relationship between subordinates' horizon and firm value. Our results are robust to controlling for alternative explanations including the pay gap between CEO and subordinate executives, executives' overconfidence, CEO's decision horizon, and other governance mechanisms. The results are also robust to alternative measures of subordinates' horizon, and after addressing potential endogeneity concerns.

Keywords: Subordinate executives' horizon; Internal governance; Risk-taking; Long-term investment; Payout ratio; Firm performance (search for similar items in EconPapers)
JEL-codes: G30 G31 G32 G35 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:74:y:2022:i:c:s0929119922000633

DOI: 10.1016/j.jcorpfin.2022.102220

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