Essays in Behavioural Corporate Finance

This thesis consists of three main studies that aim to investigate the impact of managerial characteristics and behaviour in different corporate finance contexts. The first chapter introduces a novel proxy for managerial conservatism trait by utilising the hand-written signature styles of Chief Executive Officers (CEOs) and Chief Financial Officers (CFOs). The proxy is motivated from psychology research, which proposes that individuals are more conservative if their first names are prone to be abbreviated or missing in their signatures. This chapter documents that conservative CEOs are more likely to make conservative corporate decisions (i.e., more capital expenditures and cash holdings) and avoid risky policies (i.e., less research & development expenses, debt financing and dividend payout). Conservative CFOs are less likely to raise more short-term debt. The second chapter explores the impact of directorate interlocking networks on stock liquidity. Directorate interlocking is evidenced as an efficient channel by which firms transmit their corporate governance and corporate practices. This chapter employs an approach from sociology to capture network centrality (i.e., a higher centrality indicates more advantages of information acquisition). This study finds that directorate connectedness reduces corporate information opacity (i.e., more efficient corporate governance, better accruals, higher auditing quality and more institutional holdings) and improves stock liquidity. The third chapter examines the association between board friendliness and corporate social responsibility (CSR). Unlike prior research which captures the similarity in demographic characteristics (e.g., managerial age, tenure and gender), this study aims to gauge the alignment of political ideologies between CEOs and independent directors to proxy for board friendliness. This chapter finds that CEOs in politically friendly boards are less likely to make CSR decisions. This chapter also documents that CEOs whose political ideologies are aligned with the ones of independent directors do not invest in CSR for the benefits of either shareholders or society.