ثبات رفتاری در امور مالی شرکت: قدرت نفوذ شخصی و شرکتی مدیر عامل شرکت

We find that firms behave consistently with how their CEOs behave personally in the context of leverage choices. Analyzing data on CEOs' leverage in their most recent primary home purchases, we find a positive, economically relevant, robust relation between corporate and personal leverage in the cross-section and when examining CEO turnovers. The results are consistent with an endogenous matching of CEOs to firms based on preferences, as well as with CEOs imprinting their personal preferences on the firms they manage, particularly when governance is weaker. Besides enhancing our understanding of the determinants of corporate capital structures, the broader contribution of the paper is to show that CEOs' personal behavior can, in part, explain corporate financial behavior of the firms they manage.

Since the start of modern capital structure research with the seminal work of Modigliani and Miller (1958), financial economists have devoted significant effort to studying the determinants of corporate leverage. The focus of most empirical work has been on market, industry, and firm characteristics. Yet, firms that are similar in terms of these fundamentals often choose very different corporate leverage. This has led researchers to recently study the impact of personal characteristics of the firm's top executive, the Chief Executive Officer, CEO (Bertrand and Schoar, 2003 and Frank and Goyal, 2009b; Graham, Harvey, and Puri, 2009; Malmendier, Tate, and Yan, 2010). Our paper extends this work, but we focus on personal decisions made by CEOs that are in the same domain as the analyzed corporate decision. Specifically, we attempt to explain corporate capital structures based on what CEOs have revealed about themselves and their debt tolerance through past personal leverage choices. The scientific basis for this hypothesis is an extensive set of well-cited studies on “behavioral consistency theory,” i.e., the notion that individuals behave consistently across situations. We find that this is a promising empirical approach in corporate finance because firms are found to behave consistently with how their CEOs behave personally in the context of leverage decisions. Besides enhancing our understanding of the determinants of corporate capital structures, the broader novel contribution of the paper is to show that CEOs personal behavior can, in part, predict corporate financial behavior of the firms they manage. 1 Until recently, most prior empirical studies assume, at least implicitly, that a firm's CEO does not impact corporate leverage decisions. If it takes a certain type of individual to rise to the top of a firm, then CEOs are homogeneous or close substitutes for one another. Alternatively, there may be significant differences across CEOs, but they do not affect firms if governance constrains CEOs from imprinting their personal preferences on the firms they manage. In either case, firms in the same industry with similar fundamentals choose similar capital structures despite being managed by different CEOs. In contrast, several researchers have recently taken the position that differences in terms of personal preferences/tastes across CEOs may indeed impact corporate leverage decisions. For example, in a recent and extensive review of empirical capital structure papers, Parsons and Titman (2008, p. 24) state that CEOs' personal characteristics, such as “managerial preferences,” may also affect capital structures. A similar prediction is provided by Opler and Titman (1994, p. 1021) who state that “[d]ifferences in management tastes…could also explain differences in leverage ratios within an industry.” Indeed, financial economists have recently examined some observable CEO characteristics as potential determinants of corporate leverage.2 Overall, the empirical evidence is ambiguous. For example, Bertrand and Schoar (2003) show that older CEOs choose lower leverage, and having a MBA does not significantly affect corporate capital structures. But, Malmendier, Tate, and Yan (2010) report that older CEOs take on more debt, and Frank and Goyal (2009b) show that MBAs are associated with more leverage. Frank and Goyal (2009b,p. 5) conclude that, “leverage choices are not all that closely connected to readily observable managerial traits,” suggesting that we are still missing identification of important CEO characteristics. By focusing on CEOs' personal leverage, our approach offers to capture the mix and interplay of the underlying CEO beliefs and preferences that are relevant to a debt decision. In contrast to existing studies of CEO characteristics, our approach is based on behavioral consistency theory.3 An individual, in our case a firm's CEO, is predicted to behave consistently across situations. Although we have not previously noted the term behavioral consistency in research in financial economics, we are aware of several recent studies in economics, finance, and accounting which are supportive of this notion. Perhaps the most important example is Barsky, Juster, Kimball, and Shapiro (1997), who show a positive relation across individuals between all the risky behaviors they study: holding stocks rather than Treasury bills, risky entrepreneurial activity, and smoking and alcohol consumption. In a corporate finance context, Malmendier and Tate (2005) find that CEOs who show signs of overconfidence in their personal portfolios are overconfident also in corporate investment decisions. Hong and Kostovetsky (forthcoming) find that portfolio managers who make personal campaign contributions to Democrats invest relatively less of the portfolios they manage in firms deemed socially irresponsible. Hutton, Jiang, and Kumar (2010) find that Republican CEOs pursue more conservative corporate policies than do Democrats. Chyz (2010) finds that CEOs who are personally more tax aggressive manage firms with more tax avoidance activities. In sum, the personal preferences and choices of decision-makers such as CEOs and portfolio managers seem to partly explain their professional decisions. In this paper, we apply behavioral consistency theory to corporate finance by studying CEOs' personal leverage (as in their choice of mortgage for their primary residences) and the corporate leverage of the firms they manage. We choose the financing of the CEOs' primary homes because it involves the domain of debt decisions, the home purchase is an important decision, and mortgage debt tends to be the most important source of debt, even if not a measure of total personal indebtedness. Notably, behavioral consistency theory only requires us to identify and use a relevant comparable situation and not the overall indebtedness of the CEO. Based on behavioral consistency theory, we predict that corporate and personal leverage are positively related.4 There is, however, a competing hypothesis which predicts that CEOs with more personal leverage prefer lower corporate leverage to countervail their high personal financial risk in their portfolio. That is, the hedging hypothesis predicts an inverse relation between personal and corporate leverage. It is not clear a priori as to which effect—behavioral consistency or hedging—is stronger, and in the end, it is an empirical question whether CEOs' personal leverage decisions explain the corporate leverage of the firms they manage. We start our empirical analysis in the spirit of Liu and Yermack (2007) and construct a database with detailed information on CEOs' primary homes and mortgages.5 In the U.S., data on individuals' total wealth and personal indebtedness are not available, but data on home purchase prices and mortgages have recently become available to researchers. Our data are from the Lexis-Nexis public records database and other public data sources (e.g., county assessor databases), and we show that our database is representative of ExecuComp firms, i.e., it is representative of large U.S. public firms. We use the mortgage to purchase price ratio, or loan-to-value (LTV) ratio, as the main measure in our empirical analysis, but we check the robustness to the use of other measures. We find significant heterogeneity across CEOs in personal home leverage: the range is from zero to 100% and the standard deviation is 35%. That is, some CEOs choose significantly higher personal leverage, either because of specific debt preferences, or because of other economic factors which we also consider. We first regress corporate leverage on personal home leverage, and we find a positive, statistically significant, and robust relation. That is, CEOs who are more conservative in terms of their personal leverage are found to manage firms that choose more conservative corporate capital structures.6 The economic magnitude of the estimated effect is comparable with other empirical determinants of corporate leverage. Suppose, for example, that we compare two CEOs, one with the median personal home leverage and one with a one-standard-deviation lower leverage. The estimated effect implies 2.5 percentage points (20%) lower corporate leverage. Personal home leverage adds a little less explanatory power (incremental adjusted R2) than firm size and profitability, but more explanatory power than other determinants of corporate leverage, e.g., tangibility. Our results are robust to numerous robustness checks, including using personal leverage measures that are not subject to a concern about the scaling by purchase price (e.g., we use a “debt/no debt” indicator rather than a continuous measure) and the use of “excess” personal leverage where we control for determinants of personal home leverage. CEO personal leverage is found to have an effect on corporate leverage even after we control for decade-old corporate leverage, so we conclude that personal leverage explains corporate leverage beyond a persistence of capital structure effect. Our results are also robust to controlling for other CEO characteristics recently proposed in corporate finance research, i.e., CEO personal leverage captures variation in corporate leverage that is not simply subsumed by other CEO characteristics. We also confirm our findings regarding a positive relation between corporate and personal leverage when we examine changes in capital structure around CEO turnovers. What are the economic mechanisms through which the positive relation between CEO personal and corporate leverage arises? One mechanism seems to be endogenous matching of CEOs to firms. CEOs with certain personal characteristics match more optimally with firms that have demand for those characteristics. Economic explanations for such optimal matching include more efficient risk allocation: CEOs who are willing to bear more financial risk match more optimally with firms for which more financial leverage is optimal. Our evidence supports CEO–firm matching because we find that firms systematically replace a CEO with one with a similar personal debt preference. That is, our CEO changes analysis reveals that CEOs who are more conservative in terms of their personal leverage are replaced with similar CEOs. Such CEO–firm matching can partly explain the persistence of corporate capital structures, as reported by Lemmon, Roberts, and Zender (2008). An alternative mechanism which can explain a positive relation between personal and corporate leverage is that CEOs imprint their personal preferences on the capital structures of the firms they manage, whether optimal or not. Our evidence supports this mechanism as well, since we find that the corporate-personal leverage relation is stronger for firms with weaker corporate governance. That is, some of our findings are consistent with studies which report that agency problems have an effect on corporate capital structures (e.g., Jung, Kim, and Stulz, 1996; Berger, Ofek, and Yermack, 1997). The rest of the paper is organized as follows. In Section 2, we discuss our hypotheses regarding the relation between CEO personal leverage and the corporate leverage of the firms they manage. In Section 3, we describe and summarize our data. In Section 4, we study the relation between CEOs' personal and corporate leverage. In Section 5, we report further empirical evidence, emphasizing the mechanisms through which the positive relation between personal and corporate leverage arises. Section 6 concludes.

The scientific basis for the hypothesis examined in this paper is an extensive set of well-cited studies on “behavioral consistency theory,” i.e., the notion that individuals tend to exhibit consistent behaviors across different situations. While behavioral consistency has the potential of explaining, at least in part, a broad set of corporate finance decisions, in this paper we take a first step by examining the relation between CEO personal and corporate leverage. We find that this is a promising empirical approach because firms behave consistently with how their CEOs behave personally, at least in the context of leverage choices. We find that CEOs personal debt preferences carry over to the corporate domain so that CEOs who do not seem to like debt personally manage firms with significantly less corporate leverage, all else equal. In terms of explaining the variation in observed capital structure, personal leverage is comparable to several standard determinants of capital structure such as firm size and profitability, and explains more of the cross-sectional variation in capital structures than does any one of a dozen personal CEO characteristics. One economic mechanism behind our results appears to be endogenous matching of CEOs to firms, whereby firms seeking, e.g., conservative capital structures match with top executives with similar debt preferences. We also find support for an alternative mechanism. Particularly when corporate governance is weak, we find that CEOs appear to more significantly imprint their personal debt preferences on corporate capital structures. The broader contribution of our paper is to show empirically that personal behaviors of CEOs can be a valuable basis to predict corporate financial behavior of the firms they manage. In other fields of economic research, Heckman and Rubinstein (2001) and Heckman, Stixrud, and Urzua (2006) show the predictive power of personal characteristics for non-financial economic outcomes. It is therefore a fruitful avenue for future research to examine additional questions related to CEOs' personalities, personal characteristics, and corporate decision-making.