We investigate whether and to what extent CEO reputation affects both the level and the value of corporate cash holdings for US firms. We show that CEO reputation has a negative impact on the level of corporate cash holdings: the most reputable CEOs hold approximately 17% less cash than the least reputable CEOs. Furthermore, we find that the value of corporate cash holdings held by the most reputable CEOs is much higher than that held by the least reputable CEOs: the difference is approximately 44 cents per dollar for the average firm in our sample. In addition, we also find that the value of one dollar of excess cash holdings held by the most reputable CEOs is worth 77 cents more than that held by the least reputable CEOs. Collectively, our findings provide new evidence in support of prior theories arguing that CEO reputation adds value to the firm’s assets. Meanwhile, our findings also suggest that the agency problem could potentially be mitigated by CEO reputation.
展开▼
