CEO's age and investment‐cash flow sensitivity

Gupta, Gaurav

doi:10.1002/mde.3519

Cited by 10 publications

(6 citation statements)

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“…Managers are independent and different from each other based on their attributes. CEO age, CEO tenure, and CEO educational background have an important influence on managers' strategic decision-making influence, which in turn affects healthy development (Gupta et al, 2018;Gupta, 2021Gupta, , 2022. Abatecola and Cristofaro (2019) focus on the impact of CEO attributes, namely CEO power, CEO personality, CEO profifiles and CEO effect, on sustainable behavior, pointing out that narcissism and arrogance play a key role in strategic dynamic rapid decision-making and efficient communication, and have a negative impact on CEO sustainable behavior.…”

Section: Introductionmentioning

confidence: 99%

Study of CEO Narcissism and Corporate R&D Investment

Wang

2022

Front. Psychol.

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Narcissism is a deep-rooted personality trait that is particularly common in corporate leaders, and narcissistic leaders have a noticeable influence on the R&D investment behavior of enterprises. This paper empirically examines the effect of CEO narcissism on R&D investment and the moderating effects of financing constraints, and the nature of corporate ownership based on the Upper Echelons Theory, using the CEO signature size as a measure of CEO narcissism for the 2007–2020 Chinese A-share listed companies. The results show that CEO narcissism has a significant negative effect on R&D investment; corporate financing constraints play a negative moderating role between CEO narcissism and R&D investment, and the negative effect of CEO narcissism on corporate R&D investment is more significant in non-state-owned firms than in state-owned firms. The study’s findings enrich and expand the theory related to CEO narcissism and have important practical implications for R&D investment decisions and the choice of corporate executives in China.

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Section: Introductionmentioning

confidence: 99%

Study of CEO Narcissism and Corporate R&D Investment

Wang

2022

Front. Psychol.

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“…This study also investigates whether the effect of powerful CEOs on earnings quality varies between large and small firms in Bangladesh. Prior studies suggest that small firms generally face more liquidity constraints than large firms, as these firms have less access to commercial paper and public debt [137][138][139][140][141]. Accordingly, small firms depend on banks and other financial institutions to arrange a significant part of their required funds [138], whereas larger companies are less financially constrained and have fewer issues with money when investing in a project [142].…”

Section: Plos Onementioning

confidence: 99%

Do powerful CEOs matter for earnings quality? Evidence from Bangladesh

2023

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This study investigates the effects of powerful Chief Executive Officers (CEOs) on earnings quality in a setting where CEOs have strong dominance over other top executives and occasionally attempt to exert their influence over corporate regulatory bodies. Using 10-year longitudinal data for the period from 2010 to 2019 and 1,395 firm-year observations from listed non-financial firms in Bangladesh, we found that CEOs’ political power and CEOs with high structural and expert power have a significant detrimental effect on earnings quality. Ownership and prestige power have an insignificant impact on earnings quality. These powerful CEOs use accrual and real activity manipulation techniques together to manage the earnings. This study uses the system-generalized method of moment estimates for estimation purposes, and the results remain robust when alternative earnings quality proxies are used. Taken together, our results suggest that CEOs’ political duality (i.e., serving simultaneously as a member of parliament and a CEO) should be restricted and that a CEO’s tenure should be limited to a reasonable period. This research adds to the existing body of knowledge by offering empirical support for CEO power dynamics on earnings quality, specifically political and prestige power.

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“…A study by Fazzari et al (1988) documented that ICFS would be strongest for firms that encounter excessive pledges between internal and external costs. Most of the studies find the evidence for developed as well as emerging economies that the ICFS has been more for financially constrained firms Impact of financial distress on ICFS than the financially unconstrained firms (see, for example, Kadapakkam et al, 1998;Goergen and Renneboog, 2001;Laeven, 2003;Shen and Wang, 2005;Ghosh and Ghosh, 2006;Degryse and De Jong, 2006;Aggarwal and Zong, 2006;Cleary et al, 2007;Giroud, 2013;Gochoco-Bautista et al, 2014;Gupta andMahakud, 2018, 2019;Nehrebecki, 2020;Ellouze and Cherif, 2020;Almeida et al, 2021;Gupta et al, 2021;Eca et al, 2022;Gupta, 2022). A study by Kadapakkam et al (1998) reports that cash flow is very strong in corporate investments in developed countries.…”

Section: Impact Of Financial Distress On Icfsmentioning

confidence: 99%

“…A study by Almeida et al (2021), evaluate the empirical evidence on the cash flow sensitivity of cash for US firms and finds that financially restricted firms preserve cash from incremental cash flows whereas financially unconstrained firms do not. Gupta (2022) investigates the impact of CEO age on ICFS in Indian firms, finding that young (older) CEOs raise (decrease) ICFS. His research also explains why the impacts of CEO age on ICFS become greater (weaker) for freestanding (group-affiliated) firms and during crisis (non-crisis) periods for standalone (group-affiliated) firms.…”

Section: Impact Of Financial Distress On Icfsmentioning

confidence: 99%

“…Previous literature documents that ICFS persists across the nation and investment is highly affected by the availability of cash flow. Several studies have investigated the ICFS for developed as well as developing economies and find that ICFS has been more for financially constrained firms than the financially unconstrained firms (see, for example, Kadapakkam et al, 1998;Goergen and Renneboog, 2001;Laeven, 2003;Shen and Wang, 2005;Ghosh and Ghosh, 2006;Degryse and De Jong, 2006;Aggarwal and Zong, 2006;Cleary et al, 2007;Giroud, 2013;Gochoco-Bautista et al, 2014;Gupta andMahakud, 2018, 2019;Nehrebecki, 2020;Ellouze and Cherif, 2020;Almeida et al, 2021;Gupta et al, 2021;Eca et al, 2022;Gupta, 2022).…”

Section: Ijmf 194mentioning

confidence: 99%

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Impact of financial distress on investment-cash flow sensitivity: evidence from emerging economy

Gupta

Mahakud

2022

IJMF

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PurposeThe purpose of this study is to examine the impact of financial distress (FD) on investment-cash flow sensitivity (ICFS) of Indian firms.Design/methodology/approachThe study uses the system generalized method of moments (GMM) technique to investigate the effect of FD on ICFS of Indian firms during the period from 2001 to 2019.FindingsUsing FD measures like Ohlson's bankruptcy method, Altman's Z-score model and financial-distress ratio, the researchers find that FD increases ICFS and negatively affects corporate investment. The researchers’ findings explain that FD increases restrictions on external financing, which makes cash flow more important for corporate investment. Additionally, the researchers find that the effects of FD on ICFS are weak (strong) for bigger and group affiliated (smaller and standalone) firms. The study’s findings are robust to several measures of FD, group affiliation and firm size.Practical implicationsFirst, the researchers find that FD affects the ICFS, therefore, financially distressed firms should have sufficient internal funds or external funds for investment. Second, lending agencies should also consider the firms' FD condition before providing funds to secure their money. Third, investors should be very careful while investing in a financially distressed firm as we find that financially distressed firms face a decline in their investment which might reduce firm profitability.Originality/valueThis study contributes to the existing literature by providing empirical evidence by analyzing the impact of FD on ICFS in the context of India. As per the authors’ knowledge, this is the first-ever attempt to examine the effect of FD on ICFS.

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CEO's age and investment‐cash flow sensitivity

Cited by 10 publications

References 62 publications

Study of CEO Narcissism and Corporate R&D Investment

Study of CEO Narcissism and Corporate R&D Investment

Do powerful CEOs matter for earnings quality? Evidence from Bangladesh

Impact of financial distress on investment-cash flow sensitivity: evidence from emerging economy

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