CEO Characteristics and Corporate Financing in Thailand

Previous financial crises have cast some doubt about the risk-taking behaviors of top executives.
This study investigates the impact of CEO characteristics on corporate financing behaviors after the 1997 Asian financial crisis. Sample firms are non-financial listed firms on the Stock
Exchange of Thailand between 2001 and 2005. We use the Ordinary Least Square (OLS) method on pooled cross-section and time-series data controlling for year and industry effects. CEO characteristics are classified into three groups—biography, network and incentives—based on the upper echelons, resource dependence and agency theories, respectively. According to the upper echelons theory, the education of CEOs has an impact on strategic choices. The result shows that CEOs with postgraduate education choose a higher level of financial leverage. Based on the resource dependence theory, networks ease difficulties to access to external resources. We find that politically connected CEOs can finance higher debt, compared to non-connected CEOs.
Our findings also support the agency theory. We find that family CEOs use more debt possibly
to maintain their voting power. Overall, our research shows that CEO characteristics affect
financing decisions. From lenders’ point of views, some attributes of CEOs may reflect better
repayment abilities of firms, thus encouraging lenders to provide higher loans. Our study also
suggests that to thoroughly investigate the significance of CEOs in shaping corporate strategies, wide aspects of CEO attributes should be considered.