CEO's early-life famine experience and tunneling: Evidence from China

The Great Chinese Famine is considered one of the most traumatic events recorded in human history and has a long-lasting influence on the survivors' behaviors. Previous studies have linked the CEOs' early-life experiences to corporate decisions and managerial behaviors, but does experience affect corporate governance? We investigate the impact of the CEO's early-life famine experience on tunneling using a data set consisting of 11,573 firm-year observations from the Chinese manufacturing companies publishing A-shares on the main board from 2006 to 2016. We find that companies run by CEOs who experienced the Great Chinese Famine (1959-1961) in their early life are less likely to collude with controlling shareholders to expropriate minority shareholders than those who did not suffer the hardships of famine. We further make mediation tests to confirm two channels: risk aversion and empathy for poverty. The overall findings align with the view of imprinting theory: CEOs' experiences of adverse events in their early life have a lasting impact on their later-life behaviors.