CEO early life experiences and cash holding: Evidence from China's great famine

Jun Hu, Antai Li and Yonggen Luo

Pacific-Basin Finance Journal, 2019, vol. 57, issue C

Abstract: This paper examines the relationship between famine-experienced CEO and cash holding behavior. We show that CEOs experienced great famine (1959–1961) hold higher level of cash. The effect is working through increasing cash sensitivity, suggesting that those CEOs immediately to retain cash from operation. The results are weaker in the CEOs who works in SOE, with higher education background and in those experiences economic reform. While, the effect is stronger in the CEOs who experiences political uncertainty. In terms of economic consequences, we find that firms governed by famine experienced CEOs have lower market value. However, during the crisis, firms governed by famine-experienced CEOs have higher market value and perform better. We argue that capital expenditure of those firms is higher and less likely to be affected by financial crisis. The results are consistent in various robustness checks and endogenous tests.

Keywords: Great famine; Cash holding; CEO style; Firm's value (search for similar items in EconPapers)
JEL-codes: D03 G32 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:57:y:2019:i:c:s0927538x19301271

DOI: 10.1016/j.pacfin.2019.101184

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