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CEO early life experiences and cash holding: Evidence from China's great famine

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  • Hu, Jun
  • Li, Antai
  • Luo, Yonggen

Abstract

This paper examines the relationship between famine-experienced CEO and cash holding behavior. We show that CEOs experienced great famine (1959–1961) hold higher level of cash. The effect is working through increasing cash sensitivity, suggesting that those CEOs immediately to retain cash from operation. The results are weaker in the CEOs who works in SOE, with higher education background and in those experiences economic reform. While, the effect is stronger in the CEOs who experiences political uncertainty. In terms of economic consequences, we find that firms governed by famine experienced CEOs have lower market value. However, during the crisis, firms governed by famine-experienced CEOs have higher market value and perform better. We argue that capital expenditure of those firms is higher and less likely to be affected by financial crisis. The results are consistent in various robustness checks and endogenous tests.

Suggested Citation

  • Hu, Jun & Li, Antai & Luo, Yonggen, 2019. "CEO early life experiences and cash holding: Evidence from China's great famine," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:pacfin:v:57:y:2019:i:c:s0927538x19301271
    DOI: 10.1016/j.pacfin.2019.101184
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    References listed on IDEAS

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    Cited by:

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    2. Zhaocheng Xu, 2023. "CEOs’ early famine experience, managerial discretion and corporate social responsibility," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-13, December.
    3. Rao, Yonghui & Hu, Zijiang & Sharma, Susan Sunila, 2021. "Do managers hedge disaster risk? Extreme earthquake shock and firm innovations," Pacific-Basin Finance Journal, Elsevier, vol. 70(C).
    4. Li, Weiping & Chen, Xiaoqi & Huang, Jiashun & Gong, Xu & Wu, Wei, 2022. "Do environmental regulations affect firm's cash holdings? Evidence from a quasi-natural experiment," Energy Economics, Elsevier, vol. 112(C).
    5. Shan Xu & Panyi Ma, 2022. "CEOs’ Poverty Experience and Corporate Social Responsibility: Are CEOs Who Have Experienced Poverty More Generous?," Journal of Business Ethics, Springer, vol. 180(2), pages 747-776, October.
    6. Kong, Dongmin & Zhao, Ying & Liu, Shasha, 2021. "Trust and innovation: Evidence from CEOs' early-life experience," Journal of Corporate Finance, Elsevier, vol. 69(C).
    7. Choi, Sanghak & Jung, Hail & Kim, Daejin, 2021. "War-experienced CEOs and corporate policies: Evidence from the Korean war," Emerging Markets Review, Elsevier, vol. 47(C).
    8. Xue, Fei & Wang, Xin & Xie, Yan & Zhang, Weihua, 2022. "Does CEO's early life experience affect corporate bond yield spread? Evidence from China's great famine," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 1012-1024.
    9. Han, Yu & Chi, Wei & Zhou, Jinyi, 2022. "Prosocial imprint: CEO childhood famine experience and corporate philanthropic donation," Journal of Business Research, Elsevier, vol. 139(C), pages 1604-1618.
    10. Wang, Li & Wu, Yiqi & Chen, Yaxin & Dai, Yunhao, 2023. "Distance produces the fear of loss: Customer geographic proximity and corporate cash holdings," International Review of Financial Analysis, Elsevier, vol. 87(C).
    11. Wang, Xiaoyu & Long, Zhineng & Zhao, Xiangfang, 2024. "Merchant guild culture and cash holdings: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 94(C).
    12. Syed Tauseef Ali & Joseph H. Zhang & Farman Ali & Misraku Molla Ayalew & Muhammad Ullah, 2024. "Ideological Imprints and Corporate Innovation: Evidence from China," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 1029-1068, March.
    13. Weiping Li & Xiaoqi Chen & Tao Yuan, 2023. "Green credit policy and corporate cash holdings: Evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S2), pages 2875-2903, June.

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    More about this item

    Keywords

    Great famine; Cash holding; CEO style; Firm's value;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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