CEO personality traits and debt contracting: Evidence from pilot CEOs

Steven Freund, Tunde Kovacs, Nam H. Nguyen and Hieu V. Phan

International Review of Financial Analysis, 2023, vol. 85, issue C

Abstract: Using pilot certificates as a proxy for the personality trait of sensation seeking, which captures the desire for varied, novel, and complex personal sensations and experiences, we find that firms with pilot CEOs use longer-maturity debt financing even when it is more costly than shorter-term debt. Our findings are robust to controlling for potential endogenous matching between firms and CEOs. Our evidence indicates that CEOs with sensation-seeking personality traits prefer long-term debt financing to avoid the liquidity risk associated with short-term debt financing that may hamper other corporate activities motivated by their sensation seeking.

Keywords: CEO personality; Sensation seeking; Debt contracting; Corporate debt maturity; Cost of capital; Liquidity risk (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:85:y:2023:i:c:s1057521922004008

DOI: 10.1016/j.irfa.2022.102450

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