Senior Executives' Famine Experience And Corporate Cash Holdings

Warren Buffett said,"The worst investment is to hold cash".However,the cash holding of China's A-share listed companies,such as Guangzhou Automobile Group,GREE electric appliance and Vanke A,is increasing rapidly.So we can't help asking why listed companies choose to hold a large amount of low-yield cash assets,and what role do corporate executives' personal traits and preferences play in cash holding decisions?To give an insight into these issues,this paper uses the external natural experiment of 1959-1961 years of great famine in China to explore the influence of senior executives' famine experience on the level of corporate cash holdings.In this study,the data of Chinese A-share listed firms in 2003-2016 years are taken as samples,we manually collect the birthplace of 1,927 CEO and 1,903 chairman of the board,so that they can be linked to the severity of famine in different regions.Finally,18,485 observations are acquired after screening.This study investigate and fine that:(1)there is a significant negative relationship between the senior executives'famine experience and the level of corporate cash holdings.This implies that executives with famine experience are more inclined to adopt radical financial policies to reduce cash assets since the lower rate of return from cash holding.(2)Comparatively,this negative relationship is more pronounced in firms where senior executives born in areas affected more heavily by famine and firms where CEO also serves as chairman of the board.Besides,this negative relationship is less pronounced comparatively in state-owned enterprises(SOEs)and firms with high proportion of large shareholders.Our results are robust to a series of robustness checks about endogeneity issue,firm fixed effects and alternative of measurement of main variable.Furthermore,we make an explore of the impact of senior executives' famine experience on corporate performance and value and find that firms with famine executives have significantly better performance and higher market value.This provides a specific evidence for our conclusions from a new angle.This study has great contributions academically and practically.Firstly,this study enriches the researches field about the influencing factors of cash holdings,pushing back the frontiers of influence of senior executive's early special experience on enterprise behavior.Secondly,the conclusion of this paper can help investors understand firms' cash management policies better and improve their decision-making efficiency according to senior executives' special experience.Finally,our findings can help us to comprehend and evaluate the importance of childhood in shaping individual personality and behavior patterns and provide valuable references for psychology and pedagogy.