Research On The Influence Of Manager's Early Life Experience On Coporate Financing And Investment Policy

A lot of literature suggests that some early life experiences can have long-term and sustained effects on individuals,but lack the research of its impact on managers' company policies.So,this paper use China's A-share listed companies as the research sample,to study the impact of managers' early special life experiences to their company's investment and financing policy.This study proposes a new explanation for the investment and financing policies of Chinese companies,that is some early managerial experience can also affect the company's investment and financing policies.This can explain some of the paradoxes or visions observed,also can provide policy reference for corporate governance and regulators.In addition,this research perspective helps to solve the endogeneity problem of endogeneity between managerial traits or irrationality and corporate policy involved in previous studies.Based on the natural experiment,this paper uses the managers' experience caused by the natural events which is not controlled by humans as the object of study,and finally choose the famine and military service.The two external shock events had the opposite effects on the individual,the former showed conservative traits and the latter showed radical characteristics.Based on the theoretical framework of behavioral finance,this paper first analyzes how the early life experiences of these two external events can influence managerial cognition,beliefs and preferences based on the relevant literatures of psychology,sociology,management and behavioral economics.Second,based on the characteristics and approaches of these influences,the author constructs a limited rational subjective optimal behavior model on the effects of the famine experience and the military experience on the firm's policy by using the traditional classical model as a prototype.And then using the relevant research hypothesis as the key points,this paper take the A-share listed companies in China as the research sample design empirical test,separately studied how the early famine experience influence the company financial policy,the investment policy and the innovation activity.The results of the study are as follows:(1)The manager's early famine and military experience can have a significant and lasting effect on managers' behavior choice and risk preference,and these effects will be transferred to the management company's financial,investment and innovation Policy.Thus providing a new explanation for the parts of the traditional corporate policy theory that can not be explained.(2)Corporate managers who experienced famine in their early years showed a more conservative financial policy than their peers or former managers: they chose a more conservative debt policy and consequently affect the firm's Capital structure,leading to lower debt ratio;in the choice of debt maturity structure,they prefer the use of short-term debt instruments to avoid long-term debt.The military experience managers will choose more radical financial policies than their peers,the military experience has significantly raised the company's asset-liability ratio,the service life and debt ratio was inverted Ushaped relationship,are not sensitive of financial risks when making financial decisions,and shows a higher level of earnings management in financial information disclosure,especially positive earnings management.(3)Different early life experiences have different effects on managers' decisions about the level of investment and the efficiency of investment in the company.The study did not find differences between the early famine experience,the military experience of the managers and general managers,but in some specific trigger conditions,a special early life experience leads differences.This suggests that these early experiences influence the firm's investment decisions through different paths: Managers who have experienced famine during childhood or adolescence are particularly sensitive to the firm's financial leverage when making decisions about the level of corporate investment.When the company's existing financial leverage is high,it will reduce the company's over-investment,but also increase the company's under-investment;The military experience managers are sensitive to the company's cash holdings,and thus affect the company's investment efficiency,when the company's cash is high,the company's over-investment problem would be higher than similar companies in general.(4)Compared to the general peer managers,the early famine experience managers and the military experience managers will reduce the company's innovation costs,and the probability of participation in innovation activities,especially when corporates' constraint mechanism is weak or company is owned by the state.