Subordinate executives’ horizon and firm policies

Mohamed Meckhaimer, Alex Annan Abakah, Awad Ibrahim, Khaled Hussainey

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    Abstract

    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.
    Original languageEnglish
    Article number102220
    Number of pages25
    JournalJournal of Corporate Finance
    Volume74
    Early online date21 May 2022
    DOIs
    Publication statusPublished - 25 May 2022

    Keywords

    • subordinate executives' horizon
    • internal governance
    • risk-taking
    • long-term investment
    • dividend payout

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