Presenter: Grzegorz Pawlina, Lancaster University

Title: Parent CEOs and Corporate Investment

Abstract: Using a hand-collected dataset, we analyze the relationship between the number of the CEO’s children and corporate investment. Results based on the sample of 432 CEOs of S&P 500 firms support our theoretical predictions that CEOs with more children have on average higher propensity to increase firm size and reduce its cash flow risk. The former relationship is attenuated for companies with better corporate governance but also for financially constrained firms. Excessive corporate investment by CEOs with more children is generally followed by a negative stock market reaction. Overall, entrenchment-increasing overinvestment and cash flow risk reduction can be seen as the CEO’s optimal response to their greater expected unemployment cost and the cost of effort (degree of inattention) resulting from a higher children number.

Host: Stefan Hirth