CEO financial background and corporate financialization

Abstract

Corporate financialization has become increasingly predominant; however, the impact of chief executive officers’ (CEOs’) characteristics on this trend remains underexplored. Although past studies have examined executive backgrounds, the effect of CEOs’ financial expertise on entity enterprises’ financialization levels is unclear. This study examined how CEOs’ financial backgrounds affect corporate financialization in Chinese A-share listed companies from 2008 to 2022. Using panel data and statistical techniques, we found that CEOs with financial backgrounds significantly promote corporate financialization. This effect is primarily mediated through increased managerial overconfidence and mitigated corporate financing constraints. The impact is more pronounced in non-state-owned and low-cash-flow firms. Our findings contribute to understanding how executive characteristics shape corporate financial strategies and offer insights for optimizing corporate governance and decision-making processes in an increasingly financialized business environment.