Financial expert CEOs: CEO׳s work experience and firm׳s financial policies

Claudia Custodio and Daniel Metzger

Journal of Financial Economics, 2014, vol. 114, issue 1, 125-154

Abstract: We study CEOs with a career background in finance. Firms with financial expert CEOs hold less cash, more debt, and engage in more share repurchases. Financial expert CEOs are more financially sophisticated: they are less likely to use one companywide discount rate instead of a project-specific one, they manage financial policies more actively, and their firm investments are less sensitive to cash flows. Financial expert CEOs are able to raise external funds even when credit conditions are tight, and they were more responsive to the dividend and capital gains tax cuts in 2003. Analyzing CEO-firm matching based on financial experience, we find that financial expert CEOs tend to be hired by more mature firms. Our results are consistent with employment histories of CEOs being relevant for corporate policies. However, we cannot formally rule out that our findings are partly explained by endogenous CEO-firm matching.

Keywords: CEO employment history; CEOs characteristics; Financial expertise; Cash holdings; Capital structure; CEO-firm matching (search for similar items in EconPapers)
JEL-codes: G30 G32 J24 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (102)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:114:y:2014:i:1:p:125-154

DOI: 10.1016/j.jfineco.2014.06.002

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