The impact of CEOs' early-life experience on the financialization of non-financial firms: Evidence from the great Chinese famine

This study investigates whether CEOs' early adverse experience could explain cross-sectional heterogeneity in the financialization of non-financial firms. We utilize whether the CEO lived through the Great Chinese Famine as a proxy for the adverse experience. We find that non-financial firms led by CEOs with such experience are significantly less likely to be involved in financialized activities than those led by CEOs without such experience. Experienced CEOs are prone to develop conservative preference for the short-term financial assets over long-term ones. The famine effect is more pronounced in enterprises with less competitive industries, less ownership of controlling shareholders, and non-Big 4 audit firms. Furthermore, channel tests demonstrate that the famine experience reduces CEO overconfidence and lowers the agency cost of their firms, resulting in a lower financialization level.