Impact of CEO’s characteristics on investment decisions of Indian listed firms: Does crisis make any difference?

Figures & data

Table 1. Summary statistics

Variables	No. of observations	Mean	Standard deviation
I/K	9255	0.09	0.18
CAGE	9255	57.04	10.62
TENU	9255	9.78	3.96
FE	9255	0.41	0.12
CE	7395	26.01	8.80
CF/K	9255	0.19	0.33
S/K	9255	0.22	0.38
TIE/TB	9255	0.10	0.17
Q	9255	1.26	0.84
PROF	9255	0.04	0.12
LIQ	9255	0.30	0.21
LEV	9255	0.38	0.19
SZ	9255	7.93	1.79
AGE	9255	34.02	11.27

Notes: This table presents the descriptive statistics of dependent and independent variables. I/K is the dependent variable where I = net investment in fixed assets, K = capital stock at the beginning of the period, CAGE = CEO age, TENU = CEO tenure, FE = financial education, CE = career experience, CF = cash flow, S = sales, TIE = total interest expenses, TB = total borrowings, Q = Tobin’s Q ratio, PROF = return on assets, LIQ = liquidity, LEV = leverage, SZ = firm size and AGE = firm age.

Table 2. Correlation matrix

Variables	I/K	CAGE	TENU	FE	CE	CF/K	S/K	TIE/TB	Q	PROF	LIQ	LEV	SZ	AGE
	(1)	(2)	(3)	(4)	(6)	(7)	(8)	(9)	(10)	(11)	(12)	(13)	(14)	(15)
I/K	1.00
CAGE	−0.112	1.00
TENU	0.023	0.045	1.00
FE	0.221	0.071	−0.013	1.00
CE	0.072	0.031	0.012	0.025	1.00
CF/K	0.373	0.05	0.017	0.011	0.011	1.00
S/K	0.181	0.012	0.018	0.007	0.026	0.004	1.00
TIE/TB	−0.062	0.002	0.040	0.005	−0.022	0.014	−0.002	1.00
Q	0.223	0.088	0.027	0.063	0.013	0.135	0.004	0.020	1.00
PROF	0.051	0.046	0.031	0.009	0.051	0.177	0.005	0.019	0.415**	1.00
LIQ	0.064	0.025	0.017	0.033	0.042	0.045	−0.026	0.017	0.043	0.062	1.00
LEV	−0.092	−0.029	0.093	0.010	0.032	−0.122	0.033	−0.070	−0.252	−0.507	−0.039	1.00
SZ	0.181	0.085	0.090	0.041	0.012	0.076*	0.038*	0.025	0.344	0.125	0.316**	0.040	1.00
AGE	0.062	0.190	0.039	0.005	0.012	0.006	0.028	0.052	0.122*	0.061	0.182	0.102	0.349**	1.00

Notes: This table presents the correlation matrix of dependent and independent variables. I/K is the dependent variable where I = net investment in fixed assets, K = capital stock at the beginning of the period, CAGE = CEO age, TENU = CEO tenure, FE = financial education, CE = career experience, CF = cash flow, S = sales, TIE = total interest expenses, TB = total borrowings, Q = Tobin’s Q ratio, PROF = return on assets, LIQ = liquidity, LEV = leverage, SZ = firm size and AGE = firm age.

** 5% level of significance.

* 10% level of significance.

Table 3. GMM estimation results of base line investment models

Variables	Coefficients (z)	Coefficients (z)	Coefficients (z)	Coefficients (z)	Coefficients (z)	Coefficients (z)
	(1)	(2)	(3)	(4)	(5)	(6)
(1/K)it−1	0.1321*** (3.65)	0.1378*** (2.78)	0.1427*** (3.89)	0.1541*** (3.28)	0.1428*** (3.88)	0.1511*** (3.11)
Qit	0.0324*** (3.28)	0.0432*** (3.21)	0.0317*** (2.68)	0.0416** (2.39)	0.0419*** (2.76)	0.0529*** (2.81)
(S/K)it	0.1126* (1.67)	0.0823* (1.69)	0.0711** (2.15)	0.0715** (2.19)	0.0891** (2.31)	0.0783* (1.88)
(CF/K)it	0.2217*** (3.55)	0.1922*** (3.61)	0.1874*** (2.89)	0.1521** (2.46)	0.1618** (2.15)	0.1719** (2.18)
(TIE/TB)it	−0.0409** (−2.45)	−0.0216** (−2.28)	−0.0316** (−2.41)	−0.0418* (−1.72)	−0.0315* (−1.81)	−0.0326** (−2.16)
PROFit	0.0917** (2.35)	0.1115** (2.51)	0.1126*** (2.56)	0.1217* (1.88)	0.1321* (1.91)	0.1126** (2.16)
LIQit	0.0616 (1.33)	0.0712 (1.46)	0.0543 (1.36)	0.0627 (1.33)	0.0926 (1.51)	0.0821 (1.11)
LEVit	−0.0912** (−2.45)	−0.0913** (−2.31)	−0.0893*** (−3.26)	−0.1218*** (−2.88)	−0.0891* (−1.88)	−0.1136* (−2.29)
SZit	0.2217*** (18.46)	0.1964*** (17.21)	0.1813*** (8.22)	0.1816*** (9.81)	0.2145*** (6.23)	0.1728*** (5.83)
AGEit	0.0512 (1.33)	0.0533 (1.17)	0.0621 (1.09)	0.0428 (1.21)	0.0416 (1.21)	0.0529 (1.51)
(CF/K)it × (CAGE)it	−	−0.1231** (−2.46)	−0.1346** (−2.41)	−	−0.1429** (−2.09)	−0.1321** (−2.27)
(CF/K)it × (TENU)it	−	−0.1261 (−1.11)	−0.1411 (−1.37)	−	−0.1319 (−1.16)	−0.1416 (−1.35)
(CF/K)it × (FE)it	−	−0.1591** (−2.23)	−0.1629** (−2.38)	−	−0.1486** (−2.41)	−0.1211** (2.42)
(CF/K)it × (CE)it	−	−	−	−	−0.1236 (−1.46)	−0.0829 (−2.31)
CAGEit	−	−	−0.2151** (−2.38)	−	−	−0.2316*** (−2.71)
TENUit	−	−	0.0216 (0.78)	−	−	0.0315 (1.08)
FEit	−	−	0.1108** (2.42)	−	−	0.1921** (2.18)
CEit	−	−	−	−	−	0.1214 (1.29)
Constant	0.1129** (2.18)	0.0821** (2.21)	0.0469** (2.12)	0.0874** (2.32)	0.0611** (2.17)	0.0319** (2.31)
Wald test	χ^2 (11) = 567.42 [0.0000]	χ^2 (14) = 353.27 [0.0000]	χ^2 (17) = 320.61 [0.0000]	χ^2 (11) = 358.95 [0.0000]	χ^2 (15) = 426.84 [0.0000]	χ^2 (19) = 338.66 [0.0000]
m1 (p)	[0.00]	[0.00]	[0.00]	[0.00]	[0.00]	[0.00]
m2 (p)	[0.63]	[0.43]	[0.26]	[0.65]	[0.35]	[0.36]
Sargan test	χ^2 (90) = 31.26 [0.6328]	χ^2 (90) = 67.29 [0.3516]	χ^2 (90) = 81.59 [0.5418]	χ^2 (90) = 25.22 [0.5321]	χ^2 (90) = 68.15 [0.2291]	χ^2 (90) = 36.15 [0.5229]
NOB	8021	8021	8021	6409	6409	6409

Notes: This table presents the baseline GMM estimation results. The estimated results are shown without and with career experience in columns (1–3) and columns (4–6), respectively. (i) I/K is the dependent variable where I = net investment in fixed assets, K = capital stock at the beginning of the period, CAGE = CEO age, TENU = CEO tenure, FE = financial education, CE = career experience, CF = cash flow, S = sales, TIE = total interest expenses, TB = total borrowings, Q = Tobin’s Q ratio, PROF = return on assets, LIQ = liquidity, LEV = leverage, SZ = firm size and, AGE = firm age, i = number of firms represented as 1, 2 ….. n, and t = time period. (ii) z-statistics given in the parenthesis.(iii) p-values given in the square brackets. (iv) m₁(m₂) is a test for first- (second-) order serial correlation in the first-differenced residuals, asymptotically distributed as N(0,1) under the null of no serial correlation. (v) Wald test is a test of joint significance of the estimated coefficients which is asymptotically distributed as chi-square under the null of no relationship and Sargan test of over identifying restrictions, which is asymptotically distributed as chi-square under the null of instrumental validity. (vi) NOB is the number of observations.

*** 1% level of significance.

** 5% level of significance.

* 10% level of significance.

Table 4. Robustness test results across different periods (excluding career experience)

Variables	Without crisis period	Without crisis period	Without crisis period	During crises period	During crises period	During crises period
	Coefficients (z)	Coefficients (z)	Coefficients (z)	Coefficients (z)	Coefficients (z)	Coefficients (z)
	(1)	(2)	(3)	(4)	(5)	(6)
(1/K)it−1	0.1762*** (2.93)	0.1819*** (2.83)	0.1328*** (2.81)	0.1217** (2.35)	0.1185*** (2.89)	0.1126** (2.51)
Qit	0.0531** (2.66)	0.0418** (2.35)	0.0321** (2.33)	0.0717** (2.45)	0.0611** (2.15)	0.0668* (1.89)
(S/K)it	0.0835** (2.21)	0.0605** (2.16)	0.0612** (2.36)	0.1144*** (2.71)	0.1216* (1.79)	0.1135*** (5.81)
(CF/K)it	0.1761** (2.11)	0.1651** (2.35)	0.1511** (2.39)	0.1812** (2.31)	0.1637*** (6.16)	0.1613*** (3.26)
(TIE/TB)it	−0.0312* (−1.69)	0.0308** (−2.19)	−0.0306** (−2.31)	−0.0414* (−1.72)	−0.0513* (−1.81)	−0.0591** (−2.18)
PROFit	0.1174** (2.19)	0.1095** (2.11)	0.1083** (2.21)	0.1152** (2.49)	0.1311** (2.28)	0.1959*** (3.11)
LIQit	0.0411 (1.15)	0.0461 (1.55)	0.0415 (1.21)	0.0623** (2.29)	0.0764** (2.18)	0.0829** (2.16)
LEVit	−0.1124* (−1.65)	−0.1391* (−1.79)	−0.1281** (−2.39)	−0.1835*** (−2.99)	−0.1425** (−2.41)	−0.1126*** (−2.65)
SZit	0.1355** (2.22)	0.1546* (1.79)	0.1491* (1.66)	0.1851*** (7.91)	0.1612* (1.89)	0.1744** (2.35)
AGEit	0.0219 (1.31)	0.0389 (1.21)	0.0215 (1.29)	0.0319*** (3.31)	0.0217* (1.72)	0.0351** (2.33)
(CF/K)it × (CAGE)it	−	−0.1541** (−2.23)	−0.1429** (−2.11)	−	−0.2721** (−2.31)	−0.2327** (−2.06)
(CF/K)it × (TENU)it	−	−0.1532 (−1.21)	−0.1439 (−1.36)	−	−0.1694 (−1.21)	−0.1528 (−1.19)
(CF/K)it × (FE)it	−	−0.1522** (−2.29)	−0.1124** (−2.09)	−	−0.2418** (−2.29)	−0.1657*** (−2.79)
CAGEit	−	−	−0.1624** (−2.21)	−	−	−0.1991** (−2.44)
TENUit	−	−	0.0035 (1.26)	−	−	0.0474** (2.41)
FEit	−	−	0.1321** (2.51)	−	−	0.1929*** (3.26)
Constant	0.0421** (2.28)	0.0369** (2.15)	0.0626** (2.31)	0.0356** (2.29)	0.0429* (1.85)	0.0319* (1.87)
Wald test	χ^2 (11) = 721.53 [0.0000]	χ^2 (14) = 824.29 [0.0000]	χ^2 (17) = 985.23 [0.0000]	χ^2 (11) = 876.36 [0.0000]	χ^2 (14) = 828.26 [0.0000]	χ^2 (17) = 942.29 [0.0000]
m1 (p)	[0.00]	[0.00]	[0.00]	[0.00]	[0.00]	[0.00]
m2 (p)	[0.46]	[0.42]	[0.63]	[0.49]	[0.45]	[0.56]
Sargan test	χ^2 (90) = 31.26 [0.4689]	χ^2 (90) = 28.11 [0.3951]	χ^2 (90) = 31.65 [0.3126]	χ^2 (90) = 45.39 [0.4953]	χ^2 (90) = 32.69 [0.1726]	χ^2 (90) = 34.39[0.3948]
NOB	3702	3702	3702	3085	3085	3085

Notes: This table reports the GMM estimated results across crisis and non-crisis periods. (i) I/K is the dependent variable where I = net investment in fixed assets, K = capital stock at the beginning of the period, CAGE = CEO age, TENU = CEO tenure, FE = financial education, CF = cash flow, S = sales, TIE = total interest expenses, TB = total borrowings, Q = Tobin’s Q ratio, PROF = return on assets, LIQ = liquidity, LEV = leverage, SZ = firm size and AGE = firm age, i = number of firms represented as 1, 2 ….. n, and t = time period. (ii) z-statistics given in the parenthesis. (iii) p-values given in the square brackets. (iv) m₁(m₂) is a test for first- (second-) order serial correlation in the first-differenced residuals, asymptotically distributed as N(0,1) under the null of no serial correlation. (v) Wald test is a test of joint significance of the estimated coefficients which is asymptotically distributed as chi-square under the null of no relationship and Sargan test of over identifying restrictions, which is asymptotically distributed as chi-square under the null of instrumental validity. (vi) NOB is the number of observations.

*** 1% level of significance.

** 5% level of significance.

* 10% level of significance.

Table 5. Robustness test results across different periods (including career experience)

Variables	Without crisis period	Without crisis period	Without crisis period	During crises period	During crises period	During crises period
	Coefficients (z)	Coefficients (z)	Coefficients (z)	Coefficients (z)	Coefficients (z)	Coefficients (z)
	(1)	(2)	(3)	(4)	(5)	(6)
(1/K)it−1	0.1411*** (2.86)	0.1612*** (2.88)	0.1319*** (2.81)	0.1113** (2.21)	0.1109*** (2.78)	0.1124** (2.44)
Qit	0.0428* (1.66)	0.0316** (2.12)	0.0417** (2.31)	0.0678** (2.42)	0.0651** (2.37)	0.0611** (2.15)
(S/K)it	0.0831* (2.05)	0.0713** (2.14)	0.0811** (2.12)	0.0984*** (2.68)	0.1017** (2.11)	0.1147*** (3.78)
(CF/K)it	0.1351** (2.47)	0.1468** (2.19)	0.1578** (2.29)	0.1714** (2.28)	0.1604*** (2.68)	0.1811*** (3.21)
(TIE/TB)it	−0.0319* (−1.78)	0.0215** (−2.42)	−0.0314** (−2.51)	−0.0511** (−1.99)	−0.0436* (−1.72)	−0.0541*** (−2.71)
PROFit	0.0904** (2.15)	0.1031** (2.15)	0.1147** (2.38)	0.1147** (2.53)	0.1367** (2.41)	0.1755*** (2.91)
LIQit	0.0512 (1.45)	0.0511 (1.21)	0.0568 (1.31)	0.0744** (2.46)	0.0861** (2.39)	0.0868** (2.35)
LEVit	−0.1314** (−2.34)	−0.1412** (−2.31)	−0.1204** (−2.48)	−0.1711*** (−2.84)	−0.1841** (−2.19)	−0.1979*** (−2.81)
SZit	0.1415** (2.23)	0.1816** (2.13)	0.1712** (2.16)	0.1911*** (3.26)	0.2112** (2.44)	0.1911** (2.41)
AGEit	0.0316 (1.41)	0.0388 (1.51)	0.0324 (1.46)	0.0541** (2.49)	0.0412** (2.26)	0.0418** (2.01)
(CF/K)it × (CAGE)it	−	−0.1421** (−2.31)	−0.1611** (−2.09)	−	−0.1126** (−2.52)	−0.0.1251** (−2.19)
(CF/K)it × (TENU)it	−	−0.1324 (−1.44)	−0.1429 (−1.31)	−	−0.1619 (−1.16)	−0.1745 (−1.46)
(CF/K)it × (FE)it	−	−0.1218** (−2.16)	−0.1129** (−2.05)	−	−0.1724** (−2.18)	−0.1904** (−2.26)
(CF/K)it × (CE)it	−	−0.0944 (−1.31)	−0.0816 (−1.38)		−0.1129** (−2.19)	−0.0914** (−2.14)
CAGEit	−	−	−0.1819** (−2.49)	−	−	−0.1911** (−2.51)
TENUit	−	−	0.0692 (1.35)	−	−	0.0789** (2.31)
FEit	−	−	0.1329** (2.44)	−	−	0.1704*** (3.38)
CEit	−	−	0.0911 (1.58)	−	−	0.1324*** (2.71)
Constant	0.0329** (2.25)	0.0322** (2.19)	0.0402** (2.28)	0.0911** (2.14)	0.0344* (1.81)	0.0236** (2.19)
Wald test	χ^2 (11) = 878.28 [0.0000]	χ^2 (15) = 826.24 [0.0000]	χ^2 (19) = 925.08 [0.0000]	χ^2 (11) = 822.15 [0.0000]	χ^2 (15) = 829.12 [0.0000]	χ^2 (19) = 811.67 [0.0000]
m1 (p)	[0.00]	[0.00]	[0.00]	[0.00]	[0.00]	[0.00]
m2 (p)	[0.65]	[0.49]	[0.68]	[0.55]	[0.51]	[0.43]
Sargan test	χ^2 (90) = 38.23 [0.5211]	χ^2 (90) = 39.05 [0.4413]	χ^2 (90) = 33.22 [0.3211]	χ^2 (90) = 52.44 [0.5215]	χ^2 (90) = 51.99 [0.3152]	χ^2 (90) = 31.33[0.3521]
NOB	2958	2958	2958	2465	2465	2465

Notes: This table reports the GMM estimated results across crisis and non-crisis periods. I/K is the dependent variable where I = net investment in fixed assets, K = capital stock at the beginning of the period, CAGE = CEO age, TENU = CEO tenure, FE = financial education, CF = cash flow, S = sales, TIE = total interest expenses, TB = total borrowings, Q = Tobin’s Q ratio, PROF = return on assets, LIQ = liquidity, LEV = leverage, SZ = firm size and AGE = firm age, i = number of firms represented as 1, 2 ….. n, and t = time period. (ii) z-statistics given in the parenthesis. (iii) p-values given in the square brackets. (iv) m₁(m₂) is a test for first- (second-) order serial correlation in the first-differenced residuals, asymptotically distributed as N(0,1) under the null of no serial correlation. (v) Wald test is a test of joint significance of the estimated coefficients which is asymptotically distributed as chi-square under the null of no relationship and Sargan test of over identifying restrictions, which is asymptotically distributed as chi-square under the null of instrumental validity. (vi) NOB is the number of observations.

*** 1% level of significance.

** 5% level of significance.

* 10% level of significance.