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CEO inside debt and investment-cash flow sensitivity


Han, J and Pan, Z, CEO inside debt and investment-cash flow sensitivity, Accounting and Finance, 56, (2) pp. 423-443. ISSN 0810-5391 (2016) [Refereed Article]

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© 2015 AFAANZ

DOI: doi:10.1111/acfi.12104


This paper provides a new explanation for investment-cash flow sensitivity from the perspective of CEO inside debt holdings. We examine the effect of CEO pensions and deferred compensation (inside debt) on investment-cash flow sensitivity for a sample of U.S. manufacturing firms from 2006 to 2012. We find that the firms with higher relative CEO leverage ratios (CEOís debt/ equity ratio scaled by the firmís debt/equity ratio) generate higher investment-cash flow sensitivity. Moreover, one standard deviation increase in the logarithm of the relative CEO leverage ratio enlarges investment-cash flow sensitivity by 50 per cent. This positive relationship still holds even after we take account of endogeneity and financial constraints.

Item Details

Item Type:Refereed Article
Keywords:investment-cash flow sensitivity, inside debt, pension, deferred compensation, managerial risk aversion
Research Division:Commerce, Management, Tourism and Services
Research Group:Banking, finance and investment
Research Field:Finance
Objective Division:Commercial Services and Tourism
Objective Group:Financial services
Objective Field:Finance services
UTAS Author:Han, J (Mr Jianlei Han)
ID Code:118523
Year Published:2016
Web of Science® Times Cited:8
Deposited By:TSBE
Deposited On:2017-07-13
Last Modified:2018-06-18

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