| The studies of behavioral finance show that, by affecting the risk tolerance capability, different background characteristics of senior executives have them make different financial decisions. Companies’ financial decisions are not only the results of influence of corporate internal governance mechanism and external environment. The background characteristics of executives will also affect the company’s financial decisions and they are important variables in financial decision-making of companies. This article will make contribution to the theory of behavioral finance and will enrich the studies of impacts put by executives’ background characteristics on corporate behaviors.In this paper, based on the theory between executives’behavior and corporate actions and the theory about financial decisions, there are analysis of the impacts put by the senior executives with working background of finance on companies’financial decisions by the use of normative analysis and empirical research methods. The study find that the impacts are different in manufacturing companies and non-manufacturing companies.When it comes to cash holdings of companies, the empirical research and normative study which based on upper echelons theory find that, in non-manufacturing companies, senior managers with financial experience prefer lower level of cash holdings. However, in manufacturing companies, due to the presence of managerial entrenchment, executives with financial work experience will keep a higher level of cash holdings. If the CEO has larger control over the company, he will still hold less cash even when the corporate has more investment opportunities. Empirical studies also find that the financial work experience of CEO reduced sensitivity between investment opportunities and the level of cash holdings and the higher the ownership concentration is, the lower the level of company’s cash holdingsWhen it comes to the capital structure, on contrary to the assumptions made in normative study, empirical research find that, due to the presence of managerial entrenchment, executives with financial working background in non-manufacturing companies prefer lower capital structure in order to avoid themselves from facing the risk of turnover caused by the company’s financial distress. Although it’s not statistically significant to support the result, manufacturing companies’ empirical regression results verify the research hypothesis of this paper to some extent that financial experienced executives have a higher preference for the capital structure under the upper echelons theory.Under the upper echelons theory, empirical results of non-manufacturing companies show that, executives with financial experience will hold more debt when the corporate is plenty of money or has many investment opportunities or they have more control over the company. Besides, seniors with financial experience reduce the sensitivity between investment opportunities and debt levels.Empirical studies also find that, when the company has higher ownership concentration, CEO will hold less debt. Besides, the supervision function of ownership concentration for managers’capacity of control is more obvious in the non-manufacturing companies. The regression of non-manufacturing companies find that older executives will choose higher level of capital structure.When it comes to investment decisions, in consistent with the hypothesis of this paper, the results of empirical studies confirm that the executives with financial work experience tend to have a higher level of investment expenditure. Empirical study also finds that executives with financial work experience will reduce the company’s internal renovation investment in fixed assets when the level of debt is high to avoid the company from running into financial difficulties.In addition, empirical results also find that, when the company has high level of capital expenditures, less money will be invested on updating fixed assets. When there is high level of ownership concentration, the corporate will carry out more investment.When it comes to dividend payments, empirical results of the manufacturing company show that CEO with financial work experience will choose a lower level of dividend payments, which is in consistent with the normative research under the theory of managerial entrenchment, empirical studies show that CEO with financial work experience in non-manufacturing companies will pay more cash dividend, although the result is not statistically significant.Empirical regressions also find that, when the company has high degree of ownership concentration, more cash dividend will be paid. When companies have more investment opportunities, managers will pay more cash dividend in order to take advantage of dividend signaling role in fund-raising to meet the investment needs of enterprises. Besides, in order to meet the needs of investments, CEO with financial work experience of manufacturing enterprises will make more use of the role of dividend signaling in fund-raising while CEO with financial work experience of non-manufacturing enterprises will make less use of the role of dividend signaling in fund-raising.In addition, the degree of managerial entrenchment of male CEO is stronger than that of female CEO in non-manufacturing companies, which makes them more reluctant to pay cash dividends to enhance shareholders’ value. Board of non-manufacturing companies will use more funds for investment decisions and less for dividends. However, with the enhancement of the independence of the board of directors, corporate dividends will be paid more in manufacturing companies, and business decisions are more likely to maximize shareholders’ value.According to the findings of this article, the main recommendations are as follows:1) companies with different nature may need to employ executives with different work background according to companies’needs.2) companies need to increase oversight on executives’ decisions, preventing the impact of bias in decision-making due to differences of executives’ background.3) Company need to improve the corporate governance structure to avoid serious agency problems resulting from CEO’s excessive control of the company which can reduce the value of the enterprise.4) Improving the company’s the supervision mechanism of shareholders and the Board will ensure the corporate to achieve the maximization of shareholders’ value to the most degree.5) Companies need to pay attention to avoid the bad impact in business decisions caused by the age or gender differences of the appointed senior executives. |
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