Effects Of CEO Background On Working Capital Financing Risk Under The Moderating Effects Of TMT Heterogeneity

As an important factor of financial management, the effective management ofworking capital can decide the operating efficiency of company, thus affecting theenterprise profitability, the operational risk and enterprise value. The current researchon the management of working capital focuses on the optimization from themanagement methods and management objects, while ignoring the effect of humancapital. As the operational decision makers, the enterprise executives’ appetite for risk,decision-making styles and expectations for the future can greatly affect the choice ofworking capital.Based on upper echelons theory, the paper selected the data of the small andmedium-sized listed companies between2005and2011as the sample of the research.After measuring their working capital financing risk, the paper set out from the age,education and tenure of CEO and empirically analyzed CEO background’s effects onworking capital financing risk. Moreover, it further explored the regulation functionsof TMT heterogeneity on working capital financing decisions. The research resultswere as follows:(a) CEO’s age was negatively related to working capital financingrisk, that is, the older the CEO was, the lower the working capital financing riskwould be.(b) CEO’s tenure was positively related to the working capital financingrisk, that is, the longer the tenure was, the higher the working capital financing riskwould be. In a certain degree, this shows that to hire older CEO or accelerate thereplacement CEO properly is helpful to reduce their working capital financing risk.(c)TMT heterogeneity in age could strengthen the negative relationship between CEObackground characteristics and working capital financing risk.(d) TMT heterogeneityin education and tenure could change the function direction of CEO backgroundcharacteristics on working capital financing risk. Under the adjustment of educationheterogeneity, the higher the CEO’s education was, the lower the working capitalfinancing risk would be. Under the adjustment of tenure heterogeneity, the longer theCEO’s tenure was, the lower the working capital financing risk would be.