The effects of executives with foreign experience on capital structure adjustments toward targets: Evidence from China. Issue 1 (31st December 2023)

• Record Type: Journal Article
• Authors: Gu, Yan; Huang, Hung-Yi; Ho, Kung-Cheng; Liu, Shengnan
• Is Part Of: Ekonomska istraživanja. Volume 36:Issue 1(2023)
• Page Start: 1470
• Page End: 1489
• Publication Date: 2023-12-31
• Subjects: Executives with foreign experience -- capital structure adjustment -- dynamics of capital structure -- under-levered firms -- over-levered firms -- corporate governance; G32 -- G38; Economics -- Research -- Periodicals; Economics -- Research; Electronic journals; 330.072
• DOI: 10.1080/1331677X.2022.2089708
• Languages: English
• ISSNs: 1331-677X

Abstract

Abstract: This study discusses the impact of executives with foreign experience on decisions involving corporate capital structures. Based on a sample of Chinese A-share listed companies, this study finds that firms with (more) executives with foreign experience adjust to the optimal capital structure faster. The effect exists mainly for over-levered firms that need to deleverage. The empirical results remain robust when using alternative methods to estimate target leverage, excluding the effects of mechanical adjustments, controlling the impact of corporate governance, and using the full sample to test asymmetric effects. In addition, firms managed by executives with foreign experience tend to maintain low leverage for a long time. Overall, the results show that executives with foreign experience help companies adopt more efficient and conservative capital structure adjustment decisions. The results enrich the literature on the impact of foreign experience on corporate decision-making.