CEO Military Background and Investment Efficiency

Irfan Ullah, Hong-Xing Fang, Mohib Ur Rahman and Amjad Iqbal

Emerging Markets Finance and Trade, 2022, vol. 58, issue 4, 1089-1102

Abstract: We identify an unexplored attribute of the CEO associated with corporate investment efficiency – military experience. We hypothesize that military experienced CEOs tend to reduce agency conflicts, are less likely to be self-interested, and have a higher tendency to take value-enhancing projects which lead to higher investment efficiency. We test our core hypotheses using a sample of Pakistani firms from 2009 to 2017 and find that CEOs’ with military experience have a positive influence on investment efficiency. This positive effect is more pronounced in reducing underinvestment problems, in the presence of strong competition, and when CEO has higher incentives, but weaker for state-owned firms. These conclusions remain valid to alternative measures, after addressing endogeneity issues, and additional analyses. Overall, our research advances the literature by providing new evidence that CEO military experience can have a significant influence on corporate decisions.

Date: 2022
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DOI: 10.1080/1540496X.2021.1937115

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