Study On Executives' Early Experiences And Corporate Debt Conservative Behavior

In the past few decades, research on capital structure in theory and practice at home and abroad has yielded fruitful results due to no shortage of controversy. Further, since Graham proposed "the mystery of debt conservatism" in 2000, studies on the behavior of the conservative debt in corporate receive much concerns. Based on the “Upper Echelons Theory”, this paper proposes a new explanation of debt conservatism in corporate from the perspective of executives' early experience. In this paper, we choose the difficult periods of 1959-1961 as research background and select A-share listed company in Shanghai and Shenzhen from 1999-2006 as research sample. Then respectively, we use OLS and Logit regression models to estimate the impact of executives' early experiences on the conservative behavior of corporate debt. We find that: executives having the famine experience at the stage of childhood or after that stage will prefer a lower level of debt in the company's financing policy, even prefer zero liabilities, showing debt conservatism. In addition, compared to male, female executives are more conservative bent in terms of debt financing. However, among the early experiences of executives, female did not show a steady and significant relationship between corporate debt conservatism. More specifically, we also find that early experienced chairman and CEO have a significant positive impact on the company's conservative behavior in debt, but for the early experienced CFO, there is no significant relationship with corporate debt conservatism.