Sentiment and Style: Evidence from Republican Managers

Serkan Karadas, Jorida Papakroni and Minh Tam Tammy Schlosky
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Serkan Karadas: College of Business and Management, University of Illinois Springfield, Springfield, IL 62703, USA
Jorida Papakroni: Department of Business, Organizations, and Society, Franklin & Marshall College, Lancaster, PA 17603, USA
Minh Tam Tammy Schlosky: College of Business and Management, University of Illinois Springfield, Springfield, IL 62703, USA

IJFS, 2022, vol. 10, issue 2, 1-17

Abstract: This study examines the relationship between corporate managers’ political ideology and corporate leverage policies conditional on investor sentiment. Based on a minimum of 21,884 observations over the 1992–2008 period, the authors show that Republican managers significantly reduce leverage during periods of high investor sentiment. To the best of the authors’ knowledge, this paper is the first to document that Republican managers are not swayed by the general tendency to increase leverage in high-sentiment periods. Overall, the empirical evidence from this study indicates that personal characteristics of managers have a consistent impact on corporate policies, providing support for the “behavioral consistency” theory. Further, the results of this study imply that internal and external stakeholders of a corporation should take into account manager personality in their decisions. For example, the board of a highly indebted company may consider hiring a conservative manager to reduce its financial risk.

Keywords: capital structure; leverage; Republican managers; investor sentiment; behavioral consistency (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2022
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