Personal CEO Characteristics and Firm Capital Structures

Abstract

This dissertation explores how manager-specific characteristics can distort firm investment policies and affect capital structure outcomes. I introduce a model of project choice which implies that managers who seek to develop their reputations will select safer projects and by extension face easier debt-financing environments. I then conduct an empirical analysis of 483 entries of matched firm-CEO data in the period between 2004 and 2007 in search of empirical support for this claim. My strongest and most salient finding is of a quadratic relationship between CEO age and firm debt ratios; this result is consistent with the hypothesis that managers are most reputation-sensitive at the start and end of their careers.