Subordinate executives’ horizon and firm policies

Motivated by the internal governance theory, we investigate the links between subordinate executives’ horizon and firm polices. Using the number of years to retirement to capture subordinate executives’ horizon, we find that subordinates’ horizon is positively associated with firm’s risk-taking, long-term investments growth, and research and development productivity, but negatively related to payout ratio. Our results are not driven by the tournament incentive or potential subordinates’ overconfidence. The results are also robust to alternative measures of subordinates’ horizon and after addressing potential endogeneity concerns using the firm-fixed effects model and employing the Inevitable Disclosure Doctrine (IDD) as a quasi-natural experiment.