CEO inside debt and investment-cash flow sensitivity

Han, Jianlei and Pan, Zheyao (2015) CEO inside debt and investment-cash flow sensitivity. Accounting and Finance, 56 2: 423-443. doi:10.1111/acfi.12104

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Author Han, Jianlei
Pan, Zheyao
Title CEO inside debt and investment-cash flow sensitivity
Journal name Accounting and Finance   Check publisher's open access policy
ISSN 0810-5391
1467-629X
Publication date 2015-01-22
Year available 2015
Sub-type Article (original research)
DOI 10.1111/acfi.12104
Open Access Status Not yet assessed
Volume 56
Issue 2
Start page 423
End page 443
Total pages 21
Place of publication Richmond, VIC, Australia
Publisher Wiley-Blackwell Publishing Asia
Language eng
Abstract This paper provides a new explanation for investment-cash flow sensitivity from the perspective of CEO inside debt holdings. We examine the effect of CEO pensions and deferred compensation (inside debt) on investment-cash flow sensitivity for a sample of U.S. manufacturing firms from 2006 to 2012. We find that the firms with higher relative CEO leverage ratios (CEO's debt/equity ratio scaled by the firm's debt/equity ratio) generate higher investment-cash flow sensitivity. Moreover, one standard deviation increase in the logarithm of the relative CEO leverage ratio enlarges investment-cash flow sensitivity by 50 per cent. This positive relationship still holds even after we take account of endogeneity and financial constraints.
Keyword Investment-cash flow sensitivity
Inside debt
Pension
Deferred compensation
Managerial risk aversion
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ
Additional Notes Article first published online: 22 JAN 2015

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2016 Collection
UQ Business School Publications
 
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Created: Tue, 17 Feb 2015, 01:41:52 EST by Karen Morgan on behalf of UQ Business School