We study CEOs with a career background in finance. Firms with financial expert CEOs hold less cash, more debt, and engage in more share repurchases. Financial expert CEOs are more financially sophisticated: they are less likely to use one companywide discount rate instead of a project-specific one, they manage financial policies more actively, and their firm investments are less sensitive to cash flows. Financial expert CEOs are able to raise external funds even when credit conditions are tight, and they were more responsive to the dividend and capital gains tax cuts in 2003. Analyzing CEO-firm matching based on financial experience, we find that financial expert CEOs tend to be hired by more mature firms. Our results are consistent with employment histories of CEOs being relevant for corporate policies. However, we cannot formally rule out that our findings are partly explained by endogenous CEO-firm matching.

CEO employment history, CEOs characteristics, Financial expertise, Cash holdings, Capital structure, CEO-firm matching
Corporate Finance and Governance: General (jel G30), Financing Policy; Capital and Ownership Structure (jel G32), Human Capital; Skills; Occupational Choice; Labor Productivity (jel J24)
Journal of Financial Economics
Department of Finance

Metzger, D.M. (2014). Financial expert CEOs: CEO’s work experience and firm’s financial policies. Journal of Financial Economics. Retrieved from http://hdl.handle.net/1765/116001