CEO's Culture and Firms' Leverage Decisions
ABSTRACT Debt mitigates agency problems between managers and stockholders by reducing free cashflows; yet, why managers voluntarily adopt debt discipline remains unclear. This paper examines how chief executive officers' (CEOs') managerial traits, shaped by national culture, influence leverage decisions. Analysing 3338 CEOs from 41 nationalities in 2280 US firms in Bloomberg 3000 index (from 2007 to 2024), we find that cultural values impact CEOs' perceptions of debt's costs/benefits. High‐mastery CEOs reduce debt regardless of current leverage, while highly embedded CEOs inadvertently pursue target capital structures. A non‐US CEO sample shows that cultural values are portable. Our findings are robust to sensitivity and endogeneity tests.
Authors
- Gazi Salah Uddin (ORCID: https://orcid.org/0000-0002-5744-0192)
- Tapas Kumar Mishra (ORCID: https://orcid.org/0000-0002-6902-2326)
- Ranadeva Jayasekera (ORCID: https://orcid.org/0000-0003-4189-4461)
- Supun Chandrasena (ORCID: https://orcid.org/0000-0001-7725-9000)
- Sijia Dai
Institutions
- Linköping University (SE)
- Queen's University Belfast (GB)
- Vilnius University (LT)
- Trinity College Dublin (IE)
- University of Southampton (GB)
Publication Details
- Journal
- European Financial Management
- Published
- 2025-04-05
- DOI
- https://doi.org/10.1111/eufm.12550
- Primary Topic
- Corporate Finance and Governance
- Type
- article
- Field-Weighted Citation Impact
- 0.00
Funders
- University of Southampton