Scandinavian Working Papers in Economics

Stockholm School of Economics Asia Working Paper Series,
Stockholm School of Economics, Stockholm China Economic Research Institute

No 2016-41: Living through the Great Chinese Famine: Early-Life Experiences and Managerial Decisions

Xunan Feng and Anders C. Johansson ()
Additional contact information
Xunan Feng: Southwestern University of Finance and Economics
Anders C. Johansson: Stockholm China Economic Research Institute, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden

Abstract: Previous studies have linked personal characteristics of business leaders to corporate decisions. We analyze if the traumatic experience of the Chinese Famine had an impact on managerial decisions. Having lived through the famine is associated with more conservative financial, investment, and cash holding policies, a lower likelihood of unethical behavior, and better firm performance during economic downturns. By exploiting the exogenous variation in local severity of the famine, we establish a causal relationship between early-life experiences and corporate policies. Our findings thus provide evidence that momentous personal experiences can have important causal effects on managerial decisions.

Keywords: Corporate decisions; Fraud; Ethics; Corporate governance; China

JEL-codes: D03; D83; D84; G11; G31; G32; J24

63 pages, November 1, 2016

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