Pilot CEOs and Corporate Cash Holdings

Abstract

We examine the effect of situation awareness developed from aviation training and experiences on corporate cash policies. We find that firms led by pilot CEOs are more likely to have higher cash holdings and higher market value of cash holdings. The findings suggest that pilot CEOs have greater situation awareness, and that these CEOs are more likely to plan ahead to cope with future liquidity needs. In additional tests, we find the level of pilot certification is associated with corporate cash holdings and the value of cash holdings. These findings provide further evidence that situation awareness can be developed through training and aviation experience. We also find that the effect of pilot CEOs on corporate cash holdings is more pronounced for firms with high growth opportunities and firms with financial constraints. These results indicate that pilot CEOs tend to hold more cash when they are aware of future opportunities and risks.