Upholding integrity: The influence of executives’ backgrounds on corporate information environment

Ngan Hoang Vu, Ha V. Dang, Hung T. Nguyen and Mia Hang Pham

Journal of Behavioral and Experimental Finance, 2025, vol. 46, issue C

Abstract: Motivated by the roles of corporate management in shaping corporate decisions and the importance of stock liquidity in financial markets, we examine whether trust in management influences the liquidity costs of the firm that they manage. Using manually collected propriety data from several datasets, this study documents that firms led by ex-military CEOs are associated with higher stock market liquidity than firms run by non-military CEOs. Military CEOs influence stock liquidity by improving their firms’ information environment and reducing performance volatility. Firms led by military CEOs have higher social capital, higher levels of voluntary disclosure, fewer stock price delays, and lower levels of informed trading. In addition, firms run by military CEOs have lower costs of capital and default risk. Overall, consistent with behavioral consistency theory, our findings highlight the importance of executives’ early-life experience in reducing information frictions, fostering trust, and improving secondary market quality.

Keywords: Information frictions; Military CEOs; Trust; Market liquidity; JEL classification; G15; G31; G34 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:46:y:2025:i:c:s2214635025000310

DOI: 10.1016/j.jbef.2025.101050

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