CEO Age and Cash Holdings around the World: The Moderating Role of Legal Origin

Аннотация

The worldwide growth in the level of corporate cash holding has prompted scholarly interest. Grounded on the precautionary motive of cash, we aim to provide a behavioural explanation to this phenomenon by exploring the relation between CEO age and corporate cash holdings. We further examine the institutional factor that may exert an influence on this relationship through a country’s legal systems, based on the notion that business corporations are part and parcel of the nexus of the institutions. Using an international sample of 24,989 firms from 90 countries, we find that CEO age is positively associated with the level of cash holdings. The positive impact is weakened when firms operate in countries with greater investor protection and better financial development. We demonstrate that older CEOs from common law, German law and post-socialist countries have a propensity to hold less cash. Additional robustness test supports our empirical findings.