A Study Of The Impact Of Executives' Career Experiences On Corporate Financial Decisions And Their Economic Consequences

Financial policy plays an important role in the company’s value creation activities.It not only determines the allocation of corporate assets,but also affects the company’s cash flow,and determines the source of funds and the cost of capital.Reasonable and rational financial policy can-promote the development of enterprises and continuously improve the value of enterprises.On the contrary,it will hinder the development of enterprises and damage the value of enterprises.Since the 1950s,many scholars have conducted in-depth research on financial policy,and have achieved outstanding progress,such as capital structure theory,capital asset pricing model,dividend policy theory,corporate investment theory,etc.These theories deepen people’s understanding about making better financial policy.However,the standard financial theory draws on the rational research paradigm of mainstream economics and regards people as completely rational people.It assumes that people can correctly process all information,make unbiased estimates for the future,and decisions are made according to the utility maximization goal,ignoring the influence of people’s emotions,emotions,and cognitive biases on decision-making.However,in real life,people are not completely rational,but people with limited rationality do not make decisions according to utility maximization in the decision-making process,but make decisions according to prospect theory.It is precise because traditional financial theory ignores the influence of human behavior in the decision-making process,so some financial phenomena in the real world,such as the sensitivity of corporate investment to cash flow,and the mergers and acquisitions of managers who damage corporate value,are not fully understood.The so-called behavioral company finance combines psychological results with corporate finance to explore the impact of people’s psychological characteristics and emotions on corporate financial decisions.As the top management and decision-maker of the company,the company’s executives have the highest decision-making power and play an important role in the financial market.Enterprise investment decisions and capital structure are the most important financial decisions that managers face,and they have an important impact on the company’s own performance and the entire economy.According to the Upper Echelons Theory,the personal characteristics of the listed company’s executives have an important influence on the company’s decision-making.The literatures at home and abroad have studied the heterogeneity of executives on the investment behavior of the companies they manage and the decision-making of capital institutions from the aspects of personal characteristics,education level,and early life experience of the company’s executives.However,there is no research in China to study the impact of professional experience on executive decision-making from the perspective of executives’ professional experience.Studying the professional experience of executives allows us to better understand the role and impact of managers in the company’s operations,as well as to understand the changes in the decision-making process in executive careers.This paper studies the impact of the professional experience of listed company executives on the company’s financial decisions and their economic consequences.This paper uses empirical analysis methods to study from the following aspects:Combining the existing research results with the existing institutional arrangements of domestic listed companies,we design indicators to measure the past professional experience of listed company executives.And from the company’s leverage level,cash holding level and capital expenditure level,comprehensively examine the impact of executives’ past professional experience on the company’s financial decisions.At the same time,considering that such research may be affected by endogeneity,this paper uses a variety of methods to eliminate the effects of endogenous.Further study on the economic impact of the past professional experience of listed company executives on the operating conditions of their companies.This section examines the impact of executives’ professional experience on their companies in terms of performance,capital operations,and capital allocation efficiency of listed companies.This article will examine in detail the mechanisms by which listed company executives’ past professional experience affects listed companies.This part studies the mechanism of the influence of executives’ professional experience on listed companies from the perspective of the level of overconfidence of listed company executives and corporate governance.Through the study of the main part,it is found that:（1）The definition and recognition of executive career experience have been completed.Through the review of the past professional experience of listed company executives,this paper identifies four important indicators of financial distress experience,namely the company’s Special Treatment experience,low cash flow experience,low liquidity experience and low stock yield experience.These experiences include the financial distress often seen by most executives who work for Chinese listed companies.（2）Corporate executives who have experienced significant declines in cash flow,liquidity shortages,and declining stock returns will adopt more conservative financial decisions,ie,lower leverage,higher cash holdings,and lower,during their subsequent tenure.The level of capital expenditure is consistent with the existing research results and theories.Company executives who have experienced Special Treatment will be’counter-current’ with higher leverage,lower cash holdings and higher capital expenditures during their subsequent tenure.This suggests that the risk preference level of listed company executives with Special Treatment experience may be at a higher level.（3）The financial distress experienced in the near future has an enhanced effect on the CEO’s influence,that is,the recent financial distress experience will amplify the change in the CEO’s risk preference.This confirms the CEO’s professional experience as an important psychological heterogeneity factor,which has an important impact on the behavior and financial characteristics of listed companies.（4）Corporate executives who have experienced significant declines in cash flow,liquidity shortages,and declining stock returns will increase the performance of their companies during their subsequent tenure.The company executives who have experienced Special Treatment will lower their company’s performance during the subsequent tenure,accompanied by an increase in the number of capital operations of the company,a reduction in capital allocation efficiency,and an increase in the risk of stock price collapse.This shows that the changes in financial decisions brought by listed company executives who experienced a sharp drop in cash flow,liquidity shortages and stock returns have increased the value of the company,while company executives who have experienced Special Treatment bring listed companies changes in financial decisions have reduced the value of the company.（5）The personal experience of listed company executives has an impact on the original level of overconfidence,that is,the experience of sharp decline in cash flow,liquidity shortage and decline in stock returns will inhibit the level of overconfidence of executives,and Special Treatment experience will have an enhanced effect on the level of overconfidence that executives have.（6）The governance level of listed companies also has a certain inhibitory effect on the risk increase and performance decline brought by the Special Treatment experience.