CEO Characteristics, Firm Policy, and Firm Performance
DOI:
https://doi.org/10.33736/ijbs.4620.2022Keywords:
Female CEO, CEO education, CEO age, financing policy, firm performanceAbstract
This research aims to investigate the effect of CEO characteristics (female gender, education, and age) on the financing policy (interest-bearing debt to total assets), investing policy (capital expenditure), and firm performance (return on assets) when it is controlled by firm size and firm age. Our research uses the data of the manufacturing companies listed on the Indonesia Stock Exchange (IDX) in the period 2010 - 2017. The results of our research show that female CEOs have a significant negative effect on financing policy. This has a significant positive effect on firm performance, but no significant effect on investing policy. We also found that CEO education negatively and significantly affects financing policy, but positively and significantly affects investing policy and performance. Meanwhile, CEO age has a significant negative influence on financing policy but no significant influence on investing policy and performance. Our research results support behavioral finance theory by providing empirical evidence that CEO behavioral aspects are correlated with the female gender, education, and age in terms of significantly affecting firm policies and performance. The implication of this research is that investors should know the CEO characteristics of the companies in which they invest their money because the CEO characteristics can be used as references to predict performance and CEO policy decision-making.
References
Adams, R. B., & Funk, P. (2012). Beyond the glass ceiling: Does gender matter?. Management Science, 58(2), 219-235. https://doi.org/10.1287/mnsc.1110.1452
Afrifa, G. A., & Tauringana, V. (2015). Corporate governance and performance of UK listed small and medium enterprises. Corporate Governance, 15(5), 719-733. https://doi.org/10.1108/CG-03-2015-0029
Ahn, J. M. (2020). The hierarchical relationships between CEO characteristics, innovation strategy and firm performance in open innovation. International Journal of Entrepreneurship and Innovation Management, 24(1), 31-52. https://doi.org/10.1504/IJEIM.2020.105275
Altuwaijri, B. M., & Kalyanaraman, L. (2020). CEO education-performance relationship: Evidence from Saudi Arabia. The Journal of Asian Finance, Economics, and Business, 7(8), 259-268. https://doi.org/10.13106/jafeb.2020.vol7.no8.259
Amore, M. D., Garofalo, O., & Minichilli, A. (2014). Gender interactions within the family firm. Management Science, 60(5), 1083-1097. https://doi.org/10.1287/mnsc.2013.1824
Amran, N. A., Yusof, M. A. M., Ishak, R., & Aripin, N. (2014). Do characteristics of CEO and chairman influence government-linked companies performance?. Procedia-Social and Behavioral Sciences, 109, 799-803. https://doi.org/10.1016/j.sbspro.2013.12.546
Barber, B. M., & Odean, T. (2001). Boys will be boys: Gender, overconfidence, and common stock investment. The quarterly journal of economics, 116(1), 261-292. https://doi.org/10.1162/003355301556400
Bautista, M. C. G., De Leon, M. M., & Nano IV, R. J. R. (2020). Women on Boards of Philippine Corporations: Quantitative Explorations. International Journal of Business and Society, 21(1), 369-386. https://doi.org/10.33736/ijbs.3258.2020
Beber, A., & Fabbri, D. (2012). Who times the foreign exchange market? Corporate speculation and CEO characteristics. Journal of Corporate Finance, 18(5), 1065-1087. https://doi.org/10.1016/j.jcorpfin.2012.07.004
Belenzon, S., Shamshur, A., & Zarutskie, R. (2019). CEO's age and the performance of closely held firms. Strategic Management Journal, 40(6), 917-944. https://doi.org/10.1002/smj.3003
Bertrand, M., & Schoar, A. (2003). Managing with style: The effect of managers on firm policies. The Quarterly journal of economics, 118(4), 1169-1208. https://doi.org/10.1162/003355303322552775
Biswas, S. (2021). Female directors and risk-taking behavior of Indian firms. Managerial Finance, 47(7), 1016-1037 https://doi.org/10.1108/MF-05-2020-0274
Burney, R. B., James, H. L., & Wang, H. (2021). Working capital management and CEO age. Journal of Behavioral and Experimental Finance, 30, 100496. https://doi.org/10.1016/j.jbef.2021.100496
Chancharat, S., Detthamrong, U., & Chancharat, N. (2019). Board structure, political connection and firm performance: Evidence from Thailand. International Journal of Business and Society, 20(3), 1096-1111.
Cline, B. N., & Yore, A. S. (2016). Silverback CEOs: Age, experience, and firm value. Journal of Empirical Finance, 35, 169-188. https://doi.org/10.1016/j.jempfin.2015.11.002
Chandren, S., Qaderi, S. A., & Ghaleb, B. A. A. (2021). The influence of the chairman and CEO effectiveness on operating performance: Evidence from Malaysia. Cogent Business & Management, 8(1), 1935189. https://doi.org/10.1080/23311975.2021.1935189
Chen, J. J. (2004). Determinants of capital structure of Chinese-listed companies. Journal of Business Research, 57(12), 1341-1351. https://doi.org/10.1016/S0148-2963(03)00070-5
Chua, M., Ab Razak, N. H., Nassir, A. M., & Yahya, M. H. (2021). Dynamic capital structure in Indonesia: Does the education and experience of CEOs matter?. Asia Pacific Management Review. Article in press. https://doi.org/10.1016/j.apmrv.2021.05.003
Custódio, C., & Metzger, D. (2014). Financial expert CEOs: CEO׳ s work experience and firm׳ s financial policies. Journal of Financial Economics, 114(1), 125-154. https://doi.org/10.1016/j.jfineco.2014.06.002
Dah, M. A., Jizi, M. I., & Kebbe, R. (2020). CEO gender and managerial entrenchment. Research in International Business and Finance, 54, 101237. https://doi.org/10.1016/j.ribaf.2020.101237
De Masi, S., Słomka-Gołębiowska, A., & Paci, A. (2021). Women on boards and monitoring tasks: an empirical application of Kanter's theory. Management Decision, 59(13), 56-72. https://doi.org/10.1108/MD-10-2019-1450
Deloitte. (2016). Woman in the boardroom: a global perspective (5th ed). Global Center for corporate governance. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/center-for-corporate-governance/us-women-in-the-boardroom-a-global-perspective-fifth-edition.pdf
Donkers, B., Melenberg, B., & Van Soest, A. (2001). Estimating risk attitudes using lotteries: A large sample approach. Journal of Risk and uncertainty, 22(2), 165-195. https://doi.org/10.1023/A:1011109625844
Eagly, A. H. (1987). Sex differences in social behavior: A social-role interpretation. New York: Psychology Press.
Eduardo, M., & Poole, B. (2016). CEO age and gender: Subsequent market performance. Cogent Business & Management, 3(1), 1146389. https://doi.org/10.1080/23311975.2016.1146389
Faccio, M., Marchica, M. T., & Mura, R. (2016). CEO gender, corporate risk-taking, and the efficiency of capital allocation. Journal of Corporate Finance, 39, 193-209. https://doi.org/10.1016/j.jcorpfin.2016.02.008
Fariha, R., Hossain, M. M., & Ghosh, R. (2021). Board characteristics, audit committee attributes and firm performance: empirical evidence from emerging economy. Asian Journal of Accounting Research. Article in press. https://doi.org/10.1108/AJAR-11-2020-0115
Ferris, S. P., Javakhadze, D., & Rajkovic, T. (2017). CEO social capital, risk-taking and corporate policies. Journal of Corporate Finance, 47, 46-71. https://doi.org/10.1016/j.jcorpfin.2017.09.003
Franke, G. R., Crown, D. F., & Spake, D. F. (1997). Gender differences in ethical perceptions of business practices: a social role theory perspective. Journal of applied psychology, 82(6), 920. https://doi.org/10.1037/0021-9010.82.6.920
Frye, M. B., & Pham, D. T. (2018). CEO gender and corporate board structures. The Quarterly Review of Economics and Finance, 69, 110-124. https://doi.org/10.1016/j.qref.2017.12.002
Fortune.com (2017). The 2017 Fortune 500 Includes a Record Number of Women CEOs. https://fortune.com/2017/06/07/fortune-women-ceos/
García, C. J., & Herrero, B. (2021). Female directors, capital structure, and financial distress. Journal of Business Research, 136, 592-601. https://doi.org/10.1016/j.jbusres.2021.07.061
Garcia-Blandon, J., Argilés-Bosch, J. M., & Ravenda, D. (2019). Exploring the relationship between CEO characteristics and performance. Journal of Business Economics and Management, 20(6), 1064-1082. https://doi.org/10.3846/jbem.2019.10447
Gottesman, A. A., & Morey, M. R. (2010). CEO educational background and firm financial performance. Journal of Applied Finance, 20(2), 70-83.
Gounopoulos, D., Loukopoulos, G., & Loukopoulos, P. (2021). CEO education and the ability to raise capital. Corporate Governance: An International Review, 29(1), 67-99. https://doi.org/10.1111/corg.12338
Graham, J. R., Li, S., & Qiu, J. (2012). Managerial attributes and executive compensation. The Review of Financial Studies, 25(1), 144-186. https://doi.org/10.1093/rfs/hhr076
Green, C. P., & Homroy, S. (2018). Female directors, board committees and firm performance. European Economic Review, 102, 19-38. https://doi.org/10.1016/j.euroecorev.2017.12.003
Gupta, N., & Mahakud, J. (2020). CEO characteristics and bank performance: evidence from India. Managerial Auditing Journal, 35(8), 1057-1093. https://doi.org/10.1108/MAJ-03-2019-2224
Gupta, G., Mahakud, J., & Verma, V. (2020). CEO's education and investment-cash flow sensitivity: an empirical investigation. International Journal of Managerial Finance, 17(4), 589-618. https://doi.org/10.1108/IJMF-01-2020-0020
Hidayatulloh, M. S., & Setiawan, R. (2020). Cash Flow, Investment, and Internationalisation Strategy. International Journal of Innovation, Creativity and Change, 13(4), 889-900.
Hoang, T. T., Nguyen, C. V., & Van Tran, H. T. (2019). Are female CEOs more risk averse than male counterparts? Evidence from Vietnam. Economic Analysis and Policy, 63, 57-74. https://doi.org/10.1016/j.eap.2019.05.001
Huang, G. (2006). The determinants of capital structure: Evidence from China. China Economic Review, 17(1), 14-36. https://doi.org/10.1016/j.chieco.2005.02.007
Huang, J. & Kisgen, D.J. (2013). Gender and corporate finance: Are male executives overconfident relative to female executives?. Journal of Financial Economics, 108(3), 822-839. https://doi.org/10.1016/j.jfineco.2012.12.005
Indonesia. (2007). The Law of the Republic of Indonesia number 40: limited liability company. http://www.flevin.com/id/lgso/translations/Laws/Law%20No.%2040%20of%202007%20on%20Limited%20Liability%20Companies%20(BKPM).pdf
Ismail, K. N. I. K., Mustapa, I. R., Abd, I. M., & Abdullah, S. N. (2019). Gender boardroom quotas: a survey of Malaysian corporate directors. International Journal of Business and Society, 20(3), 968-968.
Jalbert, T., Rao, R. P., & Jalbert, M. (2002). Does school matter? An empirical analysis of CEO education, compensation, and firm performance. International Business and Economics Research Journal, 1(1), 83-98. https://doi.org/10.19030/iber.v1i1.3882
Jurkus, A. F., Park, J. C., & Woodard, L. S. (2011). Women in top management and agency costs. Journal of Business Research, 64(2), 180-186. https://doi.org/10.1016/j.jbusres.2009.12.010
Kalkhouran, A. A. N., Nedaei, B. H. N., & Rasid, S. Z. A. (2017). The indirect effect of strategic management accounting in the relationship between CEO characteristics and their networking activities, and company performance. Journal of Accounting & Organizational Change. 13(4), 471-491. https://doi.org/10.1108/JAOC-05-2015-0042
Kaur, R., & Singh, B. (2019). Do CEO characteristics explain firm performance in India?. Journal of Strategy and Management, 12(3), 409-426. https://doi.org/10.1108/JSMA-02-2019-0027
Kaur, N., & Singh, V. (2021). Empirically examining the impact of corporate social responsibility on financial performance: evidence from Indian steel industry. Asian Journal of Accounting Research, 6(2), 134-151. https://doi.org/10.1108/AJAR-07-2020-0061
Khan, W. A., & Vieito, J. P. (2013). CEO gender and firm performance. Journal of Economics and Business, 67, 55-66. https://doi.org/10.1016/j.jeconbus.2013.01.003
Khaw, K. L. H., Nordin, S., & Wong, W. C. (2019). Firm risk and corporate policies: From the Shariah certification perspective. International Journal of Business and Society, 20(3), 1257-1275.
King, T., Srivastav, A. & Williams, J.(2016). What's in an education? Implications of CEO education for bank performance. Journal of Corporate Finance, 37, 287-308. https://doi.org/10.1016/j.jcorpfin.2016.01.003
Lam, K. C., McGuinness, P. B., & Vieito, J. P. (2013). CEO gender, executive compensation and firm performance in Chinese‐listed enterprises. Pacific-Basin Finance Journal, 21(1), 1136-1159. https://doi.org/10.1016/j.pacfin.2012.08.006
Liu, C., & Jiang, H. (2020). Impact of CEO characteristics on firm performance: evidence from China listed firms. Applied Economics Letters, 27(14), 1-5. https://doi.org/10.1080/13504851.2019.1607965
Liu, T., Wei, Z. & Xie, F. (2014). Do women directors improve firm performance in China? Journal of Corporate Finance, 28, 169-184. https://doi.org/10.1016/j.jcorpfin.2013.11.016
Malm, J., Adhikari, H. P., Krolikowski, M. W., & Sah, N. B. (2021). The old guard: CEO age and corporate litigation. Journal of Behavioral and Experimental Finance, 31, 100545. https://doi.org/10.1016/j.jbef.2021.100545
Manner, M. H. (2010). The impact of CEO characteristics on corporate social performance. Journal of business ethics, 93(1), 53-72. https://doi.org/10.1007/s10551-010-0626-7
Mohammad, H. S., & Bujang, I. (2019). Does Intellectual Capital Influence Firms' Financial Performance? A Comparative Analysis into Three Malaysian Industries. International Journal of Business and Society, 20(1), 260-276.
Muller-Kahle, M. I., & Schiehll, E. (2013). Gaining the ultimate power edge: Women in the dual role of CEO and Chair. The Leadership Quarterly, 24(5), 666-679. https://doi.org/10.1016/j.leaqua.2013.05.001
Naseem, M. A., Lin, J., ur Rehman, R., Ahmad, M. I., & Ali, R. (2020). Does capital structure mediate the link between CEO characteristics and firm performance?. Management Decision, 58(1), 164-181. https://doi.org/10.1108/MD-05-2018-0594
Nazir, A., Azam, M., & Khalid, M. U. (2021). Debt financing and firm performance: empirical evidence from the Pakistan Stock Exchange. Asian Journal of Accounting Research, 6(3), 324-334. https://doi.org/10.1108/AJAR-03-2019-0019
Nelson, J. (2005). Corporate governance practices, CEO characteristics and firm performance. Journal of Corporate Finance, 11(1-2), 197-228. https://doi.org/10.1016/j.jcorpfin.2003.07.001
Nguyen, P., Rahman, N., & Zhao, R. (2018). CEO characteristics and firm valuation: a quantile regression analysis. Journal of Management & Governance, 22(1), 133-151. https://doi.org/10.1007/s10997-017-9383-7
Oldford, E., Ullah, S., & Hossain, A. T. (2021). A social capital view of women on boards and their impact on firm performance. Managerial Finance, 47(4), 570-592. https://doi.org/10.1108/MF-02-2020-0091
Olsen, B. C., Sisodiya, S. R., & Swisher, J. (2016). A note on assessing the relation between CEO characteristics and stock performance: A lpha A bove R eplacement. Accounting & Finance, 56(3), 787-802. https://doi.org/10.1111/acfi.12095
Ozkan, A. (2001). Determinants of capital structure and adjustment to long run target: evidence from UK company panel data. Journal of Business Finance and Accounting, 28(1-2), 175-198. https://doi.org/10.1111/1468-5957.00370
Pasaribu, P. (2017). Female directors and firm performance: Evidence from UK listed firms. Gadjah Mada International Journal of Business, 19(2), 145-166. https://doi.org/10.22146/gamaijb.15619
Peni, E. (2014). CEO and Chairperson characteristics and firm performance. Journal of Management & Governance, 18(1), 185-205. https://doi.org/10.1007/s10997-012-9224-7
Peterson, S. J., Galvin, B. M., & Lange, D. (2012). CEO servant leadership: Exploring executive characteristics and firm performance. Personnel Psychology, 65(3), 565-596. https://doi.org/10.1111/j.1744-6570.2012.01253.x
Rajan, R., & Zingales, L. (1995). What Do We Know about Capital Structure? Some Evidence from International Data. Journal of Finance, 50, 1421-1460. https://doi.org/10.1111/j.1540-6261.1995.tb05184.x
Ross, S. A., Westerfield, R. W., & Jaffe, J. (2010). Corporate Finance. McGrawHill.
Rossi, F., Hu, C., & Foley, M. (2017). Women in the boardroom and corporate decisions of Italian listed companies: Does the "critical mass" matter?. Management Decision, 55(7), 1578-1595. https://doi.org/10.1108/MD-01-2017-0029
Saidu, S. (2019). CEO characteristics and firm performance: focus on origin, education and ownership. Journal of Global Entrepreneurship Research, 9(1), 1-15. https://doi.org/10.1186/s40497-019-0153-7
Serfling, M.A. (2014). CEO age and the riskiness of corporate policies. Journal of Corporate Finance, 25, 251-273. https://doi.org/10.1016/j.jcorpfin.2013.12.013
Setiawan, R., & Agustin, R. (2018). Industrial diversification and firm performance of manufacturing: Does efficiency matter? Trikonomika, 17(2), 72-77. https://doi.org/10.23969/trikonomika.v17i2.1146
Setiawan, R., Handiliastawan, I., & Jafar, R. (2020). Commissioner board characteristics, ownership concentration, and corporate performance. Jurnal Keuangan dan Perbankan, 24(2), 131-141. https://doi.org/10.26905/jkdp.v24i2.3827
Setiawan, R., & Rachmansyah, A. (2019). Firm Characteristics, Macroeconomic Variables and Cash Holdings in Indonesia and Singapore. International Journal of Innovation, Creativity and Change, 9(8), 265-286.
Shen, Y., Wallace, D., Reddy, K., & Ramiah, V. (2021). An investigation of CEO characteristics on firm performance. Accounting & Finance. Article in press. https://doi.org/10.1111/acfi.12896
Singh, S. K., Basuki, B., & Setiawan, R. (2021). The Effect of Non-Performing Loan on Profitability: Empirical Evidence from Nepalese Commercial Banks. Journal of Asian Finance, Economics and Business, 8(4), pp. 709-716.
Soewarno, N., & Nugroho, D. A. (2020). Influence of CEO Characteristics to Firm Performance with CSR as A Mediation Variable. Elementary Education Online, 19(4), 403-417.
Sumarta, N. H., Prabowo, M. A., Amidjaya, P. G., Supriyono, E., & Prameswari, A. P. (2021). CEO Characteristics and Environmental Performance: Evidence from Indonesian Banks. International Journal of Business and Society, 22(2), 1015-1033. https://doi.org/10.33736/ijbs.3779.2021
Tejedo-Romero, F., Rodrigues, L. L., & Craig, R. (2017). Women directors and disclosure of intellectual capital information. European Research on Management and Business Economics, 23(3), 123-131. https://doi.org/10.1016/j.iedeen.2017.06.003
Terjesen, S., Couto, E. B., & Francisco, P. M. (2016). Does the presence of independent and female directors impact firm performance? A multi-country study of board diversity. Journal of Management & Governance, 20(3), 447-483. https://doi.org/10.1007/s10997-014-9307-8
Ting, I. W. K., Kweh, Q. L., & Hoanh, L. T. H. (2018). Board meeting frequency and financial performance: A case of listed firms in Vietnam. International Journal of Business and Society, 19(2), 464-472.
Titman, S., & Wessels, R. (1988). The Determinants of Capital Structure Choice. Journal of Finance, 43, 1-19. https://doi.org/10.1111/j.1540-6261.1988.tb02585.x
Tran, C. D., Minh, L. P. T., & Wang, J. Y. (2021). The influence of female leadership towards performance: evidence from Western European financial firms. International Journal of Business and Society, 22(2), 513-531. https://doi.org/10.33736/ijbs.3731.2021
Vestal, A., & Guidice, R. (2019). The determinants and performance consequences of CEO strategic advice seeking. Journal of General Management, 44(4), 232-242. https://doi.org/10.1177/0306307019833491
Vintilă, G., Onofrei, M., & Gherghina, Ş. C. (2015). The effects of corporate board and CEO characteristics on firm value: Empirical evidence from listed companies on the Bucharest stock exchange. Emerging Markets Finance and Trade, 51(6), 1244-1260. https://doi.org/10.1080/1540496X.2015.1073518
Vu, T. H., Van-Duy, N., Ho, T., & Vuong, Q. H. (2019). Determinants of Vietnamese Listed Firm Performance: Competition, Wage, CEO, Firm Size, Age, and International Trade. Journal of Risk and Financial Management, 12(2), 1-19. https://doi.org/10.3390/jrfm12020062
Wang, G., Holmes Jr, R. M., Oh, I. S., & Zhu, W. (2016). Do CEOs matter to firm strategic actions and firm performance? A meta‐analytic investigation based on upper echelons theory. Personnel Psychology, 69(4), 775-862. https://doi.org/10.1111/peps.12140
Wang, X., Deng, S., & Alon, I. (2021). Women executives and financing pecking order of GEM-listed companies: Moderating roles of social capital and regional institutional environment. Journal of Business Research, 136, 466-478. https://doi.org/10.1016/j.jbusres.2021.07.055
Wijaya, L. I., Narsa, I. M., Irwanto, A., & Setiawan, R. (2021). Are investors' desires for dividend increases stronger than dividend initiation?. International Journal of Trade and Global Markets, 14(6), 559-579. https://doi.org/10.1504/IJTGM.2021.118900
Downloads
Published
How to Cite
Issue
Section
License
Copyright Transfer Statement for Journal
1) In signing this statement, the author(s) grant UNIMAS Publisher an exclusive license to publish their original research papers. The author(s) also grant UNIMAS Publisher permission to reproduce, recreate, translate, extract or summarize, and to distribute and display in any forms, formats, and media. The author(s) can reuse their papers in their future printed work without first requiring permission from UNIMAS Publisher, provided that the author(s) acknowledge and reference publication in the Journal.
2) For open access articles, the author(s) agree that their articles published under UNIMAS Publisher are distributed under the terms of the CC-BY-NC-SA (Creative Commons Attribution-Non Commercial-Share Alike 4.0 International License) which permits unrestricted use, distribution, and reproduction in any medium, for non-commercial purposes, provided the original work of the author(s) is properly cited.
3) For subscription articles, the author(s) agree that UNIMAS Publisher holds copyright, or an exclusive license to publish. Readers or users may view, download, print, and copy the content, for academic purposes, subject to the following conditions of use: (a) any reuse of materials is subject to permission from UNIMAS Publisher; (b) archived materials may only be used for academic research; (c) archived materials may not be used for commercial purposes, which include but not limited to monetary compensation by means of sale, resale, license, transfer of copyright, loan, etc.; and (d) archived materials may not be re-published in any part, either in print or online.
4) The author(s) is/are responsible to ensure his or her or their submitted work is original and does not infringe any existing copyright, trademark, patent, statutory right, or propriety right of others. Corresponding author(s) has (have) obtained permission from all co-authors prior to submission to the journal. Upon submission of the manuscript, the author(s) agree that no similar work has been or will be submitted or published elsewhere in any language. If submitted manuscript includes materials from others, the authors have obtained the permission from the copyright owners.
5) In signing this statement, the author(s) declare(s) that the researches in which they have conducted are in compliance with the current laws of the respective country and UNIMAS Journal Publication Ethics Policy. Any experimentation or research involving human or the use of animal samples must obtain approval from Human or Animal Ethics Committee in their respective institutions. The author(s) agree and understand that UNIMAS Publisher is not responsible for any compensational claims or failure caused by the author(s) in fulfilling the above-mentioned requirements. The author(s) must accept the responsibility for releasing their materials upon request by Chief Editor or UNIMAS Publisher.
6) The author(s) should have participated sufficiently in the work and ensured the appropriateness of the content of the article. The author(s) should also agree that he or she has no commercial attachments (e.g. patent or license arrangement, equity interest, consultancies, etc.) that might pose any conflict of interest with the submitted manuscript. The author(s) also agree to make any relevant materials and data available upon request by the editor or UNIMAS Publisher.
