Capital Structure Decisions and Managerial Overconfidence During 21st-Century Pandemics

69 Pages Posted: 20 Mar 2024

See all articles by Ayobolawole Adewale Ogundipe

Ayobolawole Adewale Ogundipe

University of Tasmania, Tasmanian School of Business and Economics, Students

Dan Daugaard

Macquarie University, Macquarie Business School

Faisal Khan

Tasmanian School of Business and Economics

Jing Jia

The University of Newcastle

Abstract

This study investigates the capital structure decisions of overconfident CEOs during pandemics using a sample of 7060 and 38362 firm-year observations for financial and nonfinancial firms, respectively, from 39 countries over the 2001––2020 period. We document that while overconfident CEOs’ debt preferences decline during 21st-century pandemics in nonfinancial firms, their contemporaries in the financial sector show more interest in debt financing. Closer analysis reveals that overconfident CEOs are more likely to prefer zero leverage during uncertainties. In conclusion, this research highlights that pandemics shape overconfident managers’ capital structure decisions.

Keywords: Capital structure, Financing policy, Behavioral biases, CEO overconfidence, Pandemics

Suggested Citation

Ogundipe, Ayobolawole Adewale and Daugaard, Dan and Khan, Faisal and Jia, Jing, Capital Structure Decisions and Managerial Overconfidence During 21st-Century Pandemics. Available at SSRN: https://ssrn.com/abstract=4765618 or http://dx.doi.org/10.2139/ssrn.4765618

Ayobolawole Adewale Ogundipe (Contact Author)

University of Tasmania, Tasmanian School of Business and Economics, Students ( email )

Hobart
Australia

Dan Daugaard

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Faisal Khan

Tasmanian School of Business and Economics ( email )

French Street
Sandy Bay
Tasmania, 7250
Australia

Jing Jia

The University of Newcastle ( email )

Discipline of Chemistry
University Drive, Callaghan, NSW 2308
Newcastle, 2308
Australia

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