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

Hu, Jun; Li, Antai; Luo, Yonggen

doi:10.1016/j.pacfin.2019.101184

Cited by 35 publications

(27 citation statements)

References 24 publications

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“…Similarly, Cain and McKeon (2016) posited that previous economic shocks have longterm, sustained impacts on individuals' risk preferences; for example, they would be repelled from investing in such risky financial products as stocks. Graham et al (2011), Zhang (2017), and Hu et al (2019 demonstrated that CEOs who had worked during the Great Depression or during the most recent global recession were deeply affected by the capital market's collapse. Bernile et al (2017), Hanaoka et al (2018), andChen et al (2019) examined the link between CEOs' disaster experience and firms' risk and capital costs.…”

Section: Managerial Experience and Corporate Actionsmentioning

confidence: 99%

“…Previous literature focused primarily on some events that have been proven significance and lasting influence on people's beliefs and preferences. This includes self-selection experiences, such as joining the army (Benmelech & Frydman, 2015) or work experience (Bamber et al, 2010;Graham et al, 2013;Zhang et al, 2019;Zhou et al, 2017); and external, non-human experiences, such as experiences with war (Malmendier et al, 2011), severe economic downturns (Graham et al, 2011), and natural disasters (Bernile et al, 2017;Hu et al, 2019). Discussing the influence of such experiences-and CEOs' early-life experience in particular-on executives' psychology, logical thinking, risk attitudes, and morality can explain a large part of the variation in corporate financial decisions, such as capital structure, investments, compensation, and disclosure policies.…”

Section: Introductionmentioning

confidence: 99%

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CEOs’ Poverty Experience and Corporate Social Responsibility: Are CEOs Who Have Experienced Poverty More Generous?

2021

J Bus Ethics

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This study examines whether the chief executive officer's (CEO's) poverty experience has an impact on firms' corporate social responsibility (CSR). We find that firms' CSR performance increases with CEOs' poverty experience; specifically, firms with CEOs who experienced early-life poverty are associated with more socially responsible activities and fewer socially irresponsible activities, such as on-the-job consumption, and are more associated with key stakeholder-related rather than community-related CSR. We further find that the positive relationship between the CEO's poverty experience and CSR strengthens for well-educated or powerful CEOs. Our evidence is consistent with our conjecture that CEOs who experienced early-life poverty have stronger compassion and prosocial psychology. Consequently, these CEOs are more willing to make long-term investments in socially beneficial activities, leading to better CSR performance, which further confirms the altruistic motivation of CSR.

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Section: Managerial Experience and Corporate Actionsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

CEOs’ Poverty Experience and Corporate Social Responsibility: Are CEOs Who Have Experienced Poverty More Generous?

2021

J Bus Ethics

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“…Studies reveal that people who experienced the Great Famine during their early-life are more inclined to save ( Cheng and Zhang, 2011 ). Managers who experienced this famine are also conservative in corporate decision makings, such as less debts and investments, more cash holding, and fewer takeovers ( Zhang, 2017 ; Feng and Johansson, 2018 ; Hu et al, 2019 ).…”

Section: Introductionmentioning

confidence: 99%

Aftershock: CEO Great Famine Experience and Stock Price Crash Risk

et al. 2021

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This study examines the effect of CEOs’ early-life traumatic experience on firm-specific stock price crash risk. Drawing on the idea of natural experiments, we take the Great Famine in China as an external traumatic event which cannot be selected or controlled by human. The analysis points out that compensation psychology and irrational defense psychology after the trauma of Great Famine are important factors that cause CEOs to hoard bad news. Based on a large sample of Chinese companies from 2007 to 2017, we find evidence that CEOs who experienced the Great Famine during early-life tend to hoard bad news, which result in higher stock price crash risk. The more severe and prolonged the Great Famine that the CEOs experienced, the greater the effect of this traumatic experience. CEOs decision-making power enhances the adverse effect of CEOs’ early-life traumatic experiences on crash risk. Findings of this study contributes to the literature by providing a new explanation for the stock price crash risk, which is of great significance for the sustained and healthy development of capital markets.

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“…Recently, there has been a growing number of research on the effects of the famine experiences. The individual's memory of the Great Chinese Famine can exist for a long time, and the experience of this period of severe material shortage makes people different from those without this experience in some aspects (Cheong et al, 2020;Deng et al, 2019;Feng & Johansson, 2018;Gooch, 2017;Hu et al, 2019;Long et al, 2020;Zhang, 2017). The studies find that CEOs who experienced the intense famines during their childhood are more risk averse (Zhang, 2017).…”

Section: Importance Of Experiencementioning

confidence: 97%

“…In addition, the early famine experience could reshape personal investment behavior. The results show that famine-experienced CEOs have a higher level of cash sensitivity, and are more likely to retain cash immediately through operation (Feng & Johansson, 2018;Hu et al, 2019). By studying the trading behavior of participants in a simulated asset market, the researchers found that a trader's experience with a major family financial loss during childhood has an impact on their willingness to trade (Cheong et al, 2020).…”

Section: Importance Of Experiencementioning

confidence: 97%

Early Life Suffering Experience from Great Famine on Firm Charity, Agency Costs, and Corporate Governance

Yang

2021

The Chinese Economy

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This study examines the impact of directors' famine experience on the corporate donation decision. We use a unique data set of 16,082 firm-year observations from Chinese listed firms to show that directors who experienced the Great Chinese Famine during 1959-1961 make more corporate donations, a result that supports the path dependency theory related to the effect of prior experiences on subsequent behaviors. The relationship between a director's famine experiences and corporate charitable contributions is robust across different types of ownership and industry. We further show that these directors appear to consume fewer perquisites (i.e., lower agency costs), improve social responsibility, mitigate earnings management, and enhance internal control quality.

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

Cited by 35 publications

References 24 publications

CEOs’ Poverty Experience and Corporate Social Responsibility: Are CEOs Who Have Experienced Poverty More Generous?

CEOs’ Poverty Experience and Corporate Social Responsibility: Are CEOs Who Have Experienced Poverty More Generous?

Aftershock: CEO Great Famine Experience and Stock Price Crash Risk

Early Life Suffering Experience from Great Famine on Firm Charity, Agency Costs, and Corporate Governance

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