CEO’s Multi-Career Background And Corporate Debt Financing Cost

Capital is the "blood" of an enterprise.Adequate financial support is the basis for the longterm good development and the guarantee of competitive advantage of enterprises.However,there is often a phenomenon of insufficient funds in the process of rapid development of enterprises.Therefore,financing problem is not only concerned in the process of enterprise management and development,but also widely discussed in academic research.Equity financing and debt financing are two main channels for enterprises in China to carry out external financing.However,there is a certain degree of principal agency problem and information asymmetry problem between external creditors and enterprises who are regarded as debtors.At present,economy in China is at a critical stage of transition to high-quality development and there is a lack of liquidity in the financial market.Therefore,enterprises have been facing the situation of high debt financing cost.If enterprises want to stand out in the critical economic transition period,the first thing to be solved is high corporate debt financing cost.In order to alleviate high corporate debt financing cost,Central bank has implemented several policies of lowering the RRR and cutting interest rates.However,these policies mainly affect the benchmark interest rate when enterprises make bank loans,but do not affect the external creditors’ risk assessment of enterprises.In order to reduce the creditors’ risk assessment level and reduce the risk premium compensation demanded by creditors,it is necessary to analyze the internal environment of enterprises.In view of the current social division of labor and the system of separating the two rights of enterprises,CEO is mainly responsible for the production,operation and strategic choice of enterprises.Compared with other senior executives,CEO is a key figure in enterprise decision-making and can better interpret the daily business decisions of enterprises.With the introduction and continuous development of Upper echelons theory,more and more scholars began to realize the heterogeneity among different CEOs and successively explored the influence of CEO’s different background characteristics on corporate financial behavior and non-financial behavior.Previous studies have shown that CEO’s different professional experience,different education levels,different academic backgrounds and other heterogeneous characteristics will affect corporate debt financing cost.Based on the above realistic background and research status,it is of theoretical and practical significance to explore whether CEO’s multi-career background can affect corporate debt financing cost and its specific influencing mechanism.In view of this,based on Upper echelons theory and Imprinting theory,this thesis takes Shanghai and Shenzhen A-share listed companies in China from 2008 to 2020 as the initial research samples and constructs the main variables of corporate debt financing cost,CEO’s multi-career background and CEO’s profession number.Firstly,this thesis makes descriptive statistics,correlation analysis and multiple regression analysis on corporate debt financing cost,CEO’s multi-career background,CEO’s profession number and selected related control variables.The results show that CEO’s multi-career background can reduce corporate debt financing cost.The research hypothesis in this thesis has been preliminarily verified.Secondly,four methods are used to test the robustness in this thesis,namely replacing the dependent variable,lagging the independent variable,propensity score matching method and instrumental variable method.The results still prove that CEO’s multi-career background can reduce corporate debt financing cost,further strengthening the robustness of the conclusion in this thesis.Thirdly,this thesis is starting from Principal agent theory,Social capital theory and Resource based theory and introduces agency cost,analyst coverage and managerial myopia.Through the analysis of intermediary effect,it is found that CEO’s multi-career background can reduce agency cost,attract more analysts’ coverage and weaken managerial myopia,thus achieving the effect of reducing corporate debt financing cost.Finally,this thesis selects different nature of property rights,different equity balances and different corporate governance level to conduct heterogeneity analysis.The results represent that in enterprises with non-stateowned,in enterprises with high equity balances and in enterprises with high levels of corporate governance,the inhibition of CEO’s multi-career background on corporate debt financing cost is more obvious.Combined with research conclusions in this thesis,recommends are put forward from the following three angles: Firstly,from the perspective of enterprises,enterprises should improve the evaluation rules for CEO promotion,strengthen the construction of manager team and ensure the sustained and stable development of enterprises in the future.Secondly,from the perspective of investors,CEO’s background characteristics are taken as supplementary investigation content before investing.Thirdly,from the personal perspective of CEO,personal growth can be planned from the aspect of professional background.Talents with complex professional experience are more favored by enterprises to some extent.This thesis studies the relationship between CEO’s multi-career background and corporate debt financing cost and the specific mechanism between them,adds a lot of literature to the relevant study on the factors which influence corporate debt financing cost,clarifies the mechanism of CEO’s multi-career background and corporate debt financing cost,provides reference value for future research and further deepens the Upper echelons theory.At the same time,this thesis can give advice for enterprises to hire and inspect CEO,provide guidance for creditors to formulate reasonable lending plans and also help to cultivate CEO’s own quality.