Executives' characteristics and corporate policies

Student thesis: Doctoral Thesis

Abstract

Recent regulatory and demographic developments in corporate governance point to changes in managerial gender and age. These changes call for a better understanding of the various implications of managers’ gender and age on firms. Existing studies suggest that managerial gender and age are systematically related to the riskiness of the firm (Huang and Kisgen 2013; Serfling 2014). These studies are mainly focused on the CEO. However, Hambrick and Mason (1984) advance the Upper Echelons Theory (UET) and argue that management is a shared activity, in which CEOs delegate responsibilities and authority to the rest of their top management teams (TMTs). They call for examining the implications of managerial characteristics at the TMT level, rather than the CEO alone. This thesis extends the literature by analysing the predictions of the UET, specifically by empirically examining whether the proportion of female managers in the TMT and the average age of the TMT are related to three major corporate financial policies.The first empirical chapter (Chapter 3) investigates corporate cash holdings, which are held for precautionary reasons (Bates, Kahle, and Stulz 2009). Hence, I examine whether managerial gender and age at the TMT level are related to cash holdings. Using a large sample comprising S&P 1500 firms for the period 1992 to 2013, the results indicate that the percentage of female managers in the TMT is positively related to cash holdings, indicating a possibility that TMTs with more female executives are more risk-averse or less overconfident, leading to further emphasis on the precautionary need for cash. Further, the average age of the TMT is negatively related to cash holdings, suggesting that older TMTs are more confident with regard to taking risker choices. Further analysis suggests that the ages of the CEO and CFO are negatively related to cash holdings, indicating that executives other than the CEO may exercise some influence over the cash holdings deThe second empirical chapter (Chapter 4) studies R&D investments, which are risky since they entail certain costs with highly uncertain payoffs (Abdel-Khalik 2014). Therefore, I investigate whether managers' gender and age at the TMT level are related to R&D investments. The analyses indicate that the percentage of female managers in the TMT and R&D investments are negatively related, consistent with the view that TMTs with more females might be more risk-averse or less overconfident, reducing investments in risky assets. Also, both female CEOs and CFOs are negatively related to R&D investments. Moreover, the results point to the lack of a systematic relationship between the average age of the TMT and R&D investments, which is theoretically possible since the experience we gain from ageing could offset the risk-aversion we develop as we age (Worthy et al. 2011). Nevertheless, the additional analysis shows that the CEO’s age (CFO’s age) is negatively (positively) related to R&D investments. Thus, the lack of a systematic relation between the average age of the TMT and R&D investments might be a product of cancelling out effect within the members of the TMT.The third empirical chapter (Chapter 5) examines two aspects of corporate payout policy; namely, the payout levels and payout methods. First, managers may face trade-offs between payouts and investments, assuming that they cannot accumulate cash for perpetuity (Caliskan and Doukas 2015). Thus, I examine whether managerial gender and age at the TMT level are related to the corporate payout levels. The analysis indicates that the percentage of female managers in the TMT is positively related to the payout levels. This is possibly because TMTs with more females are more risk-averse or less overconfident, choosing to distribute funds, given that that this choice is less risky than investments. There is also some evidence to sugges
Date of Award1 Oct 2017
LanguageEnglish
Awarding Institution
  • University Of Strathclyde
SupervisorKrishna Paudyal (Supervisor) & Andrew Marshall (Supervisor)

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