Does a Chairperson's military experience promote share repurchase? Evidence from Chinese listed companies

Abstract

Although some studies have suggested that executives' military experience affects corporate decisions, whether and how it is associated with share repurchases is less well understood. Using a data set of 10,960 firm-year observations from A-share listed firms between 2005 and 2019, we found that firms run by military chairpersons are more likely to announce and implement share repurchases. In addition, we found the short-run abnormal returns of share repurchase announcements to be less favourable in firms with military chairpersons. The findings are best explained by the overconfidence hypothesis, which holds that military chairpersons are prone to overconfidence and perceive their firm's stocks as underpriced. We also found that the positive effect of chairpersons' military experiences on share repurchases is more pronounced when they have longer tenure. Moreover, we found that the involvement of grassroots committees of the Chinese Communist Party in firm decision-making could effectively restrain military chairpersons' overconfidence bias.