CEO generational differences, risk taking and political connections: Evidence from Malaysian firms

Abstract

This paper examines the impact of generational differences between Chief Executive Officer (CEOs) with regards to risk taking, proxied by corporate leverage. Further, we investigate whether this relationship is exacerbated or attenuated by political connections. Using a Malaysian dataset for the period 2005 to 2016, we find that Builder CEOs (Generation X, Gen X) are positively associated with corporate leverage, while no significant results are obtained for Seeker CEOs (Baby Boomers). In addition, the positive association is exacerbated if the Gen X CEOs are connected to top politicians in Malaysia. Our additional analyses show that the results are largely driven by duration of political connections and ownership structure of the politically connected firms. This suggests that heterogeneous political connections influence Builder CEOs’ decisions on corporate leverage.