The impact of CEO educational background on corporate cash holdings and value of excess cash

This study examines the effect of CEOs' educational background on the cash holdings policy and value of excess cash in Korean firms considering the education system in Korea, where academic tracks are determined earlier in life than in other countries. We show that although firms with CEOs who majored in business or in science or engineering have less cash holdings, the value of excess cash holdings varies by major. We find that firms with CEOs who majored in business (science or engineering) show a higher (lower) value of excess cash than other CEOs. Moreover, firms whose CEOs have a master's degree show a higher value of excess cash. In sum, this study suggests that corporate financial policy depends on CEOs' educational background, which determines their personal traits and professional career experience and thus lead to different firm performance in terms of cash holdings policy and the value of excess cash.