Senior Executives’ Early Famine Experience And Company Cash Holdings

Cash is the blood of a company,and holding ample cash has an important impact on the production,management,and financing of enterprises."Cash is king,steady first;reasonable holding,efficiency first" has become the keynote of cash use in business management,and the financial concept that "cash is gold,credit is silver" has long been established in modern enterprise management.The importance of cash assets in corporate financial strategy and business strategy,as well as the difficulty of corporate cash flow forecasting and corporate cash demand forecasting,means that the quality of cash holding behavior is not only a measure of a company’s financial management capabilities,but also the success or failure of corporate strategy.Brealey and Myers proposed in 1996 how to determine the company’s cash holdings is one of the top ten unsolved problems in the financial field.The cracking of this puzzle will definitely push the modern enterprise management level to a new stage.As the most influential decision maker in the company,the chairman has the highest decision-making power,determines the management and operation of the company,and has a stronger interpretation of the company’s policies than other managers.Chief excecutive officers are the decision makers and executives of the company’s business activities,and how their characteristics affect decision-making behaviors has received extensive attention in the academic and practical circles.The research on the characteristics of executives has also been a long-standing.At present,the characteristics of executives in the literature mainly include gender,age,education,tenure,professional experience,life experience,and religious beliefs.In recent years,the early experience of executives has become a research hotspot,but most of the literature focuses on how the early experience of executives has affected corporate investment decisions and financing decisions,and less on its impact on cash decisions,especially early experience of famine.Whether the executives will increase the level of corporate cash holdings or reduce the level of cash holdings,there is no literature to conduct an in-depth study.And it is worth further inquiring that because the early life experiences of senior executives may have shaped the abnormal behavioral traits and living habits of executives,which may have different effects on the company’s production and management decisions,then the early famine experience of executives is passed.What mechanism of action affects the company’s cash holdings? These problems are worthy of our study and investigation.This paper takes China’s A-share listed companies from 2001 to 2017 as the research object,examines the impact of the early experience of senior famine on corporate cash holdings,and introduces the financial crisis as an exogenous shock variable to establish a double difference model to investigate uncertainty.In the case of increased,the behavior of executives with famine experience on corporate cash decisions will change.It was found that executives with famine experienced companies had significantly lower cash holdings than those with no famine experience,and that the impact of executive famine experience on cash holdings before the financial crisis was in the financial crisis.After that,it is more obvious.In addition,after further controlling the characteristics of other aspects of the executive,the fixed effects at the company level,and the endogenous problems,the above conclusions are still valid.It should be emphasized that the above research results of this paper are established,at least based on two theoretical premise: One is that the financial consequences of the cash holdings of the executives with famine experience are higher in cash value;the second is the experience of famine.There are no financing constraints in the company where the executives are located.Therefore,further tests have found that executives with famine experience have higher cash holding value than companies with no famine experience,and there is no financing constraint,which further confirms the above.Theoretical premise.At the same time,this paper proposes that executives who have experienced famine will significantly increase their ability to cope with risks and deal with complex problems,and then introduce risk-taking indicators to examine the mechanism of action between the two,and find that there is no famine experience with executives.Compared with the company,the executives have a famine experience and the company’s risk-taking level is significantly higher,which further proves that its risk management ability is stronger.In addition,the study also pointed out that executives may have confidence in their ability after experiencing difficulties,which may lead to their tendency to overconfident and underestimate risks.This situation may be more in companies with worse corporate governance mechanisms.Obviously,since internal control is the cornerstone of corporate governance,this paper further analyzes and tests after introducing internal control as a regulatory variable.Compared with the company that executives do not have famine experience,the internal control quality of executives with famine experience is even better.In the worst case,the cash holding level is not significantly lower,so the “cash holding calibration hypothesis” may not be established in this paper,indicating that executives with famine experience are more likely to be based on personal abilities,not just their personality.The change is made to make a lower level of cash holdings.This paper first studies the impact of executive famine experience on corporate cash holdings.It is of great significance for understanding Chinese business management and economic development issues.In theory,the literature has used tradeoff theory to explain high cash in listed companies.The motivation of holding,but there is no literature to explain the reasons for the low motives of corporate cash holdings from the perspective of trade-off theory.This paper takes the lead in expanding the theory of cash holding from this perspective;in practice,this paper Studies have shown that executives who experienced early famine,although more cautious,have significantly greater ability to withstand risks and respond to crises,which has important practical implications for companies to hire and examine managers.