CEO Educational Background and External Financing Choices: Evidence from Korea

Seongjae Mun, Hyeong Joon Kim

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

Educational background in Korea can represent personal traits, since academic tracks in the Korean educational system are determined earlier in the individual’s lifetime than in other countries. This study investigates whether CEO educational background affectswww.earticle.net the firm’s external financing choices. We find that firms with CEOs who majored in science or engineering are less likely to issue equity, and the investment of firms with such CEOs is more responsive to cash flow. We also find that equity issue announcements by firms with such CEOs exhibit more negative market reaction, suggesting that those have bad signals, for instance, poor conditions to issue debt even though they prefer debt to equity. Overall, our study suggests that Korean CEOs’ educational background, particularly science or engineering, is related to managerial confidence, which is the belief that the market undervalues their firms. However, we cannot completely rule out the endogeneity concern arising from CEO-firm matching.

Original languageEnglish
Pages (from-to)79-124
Number of pages46
JournalAsian Review of Financial Research
Volume34
Issue number4
DOIs
StatePublished - Nov 2021

Keywords

  • CEO educational background
  • External financing
  • Investment
  • Managerial traits
  • Seasoned equity offerings

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