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CEO foreign experience and corporate financial investment

Author

Listed:
  • Liang, Shangkun
  • Niu, Yuhao
  • Xin, Fu
  • Jiang, Lixian

Abstract

Using a hand-collected sample of CEOs' foreign experience data for Chinese listed firms from 2008 to 2018, we investigate the impact of CEO foreign experience on corporate financial investment behaviors. We find a significantly negative association between CEO foreign experience and risky financial investment and a significantly positive association between CEO foreign experience and safety financial investment, suggesting CEOs with foreign experience can help constrain their firms' risky investment. The result is robust to Heckman two-stage analysis, instrumental variable approach, propensity score matching, and other robustness tests. Further analyses reveal that CEOs with foreign experience act as a key role of inhibiting the risky financial investment when firms have suffered poor internal or external corporate governance. Moreover, the relation between CEOs' foreign experience and financial investment is more pronounced when CEOs have financial background or CEO's tenure is shorter. The relation between CEOs' foreign experience and financial investment is more significant when CEO's overseas background belongs to a common law country or region. After replacing the dependent variable, this paper finds that CEO's overseas background also inhibits firm's share price risk and business risk. Finally, this conclusion is consistent with the CFO's overseas experience as the research object. Overall, the findings suggest that CEO foreign experience matters for corporate financial decisions in emerging markets.

Suggested Citation

  • Liang, Shangkun & Niu, Yuhao & Xin, Fu & Jiang, Lixian, 2024. "CEO foreign experience and corporate financial investment," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 929-946.
    • Handle: RePEc:eee:reveco:v:93:y:2024:i:pa:p:929-946
    DOI: 10.1016/j.iref.2024.03.080
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    More about this item

    Keywords

    CEO; Foreign experience; Corporate financial investment; Corporate governance;
    All these keywords.

    JEL classification:

    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • 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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