Do Aggressive Cfos Borrow Short-Term?

Abstract

We study the impact of a CFO’s psychological aggressiveness on debt maturity, using the facial width-to-height ratio (fWHR) as a proxy for his/her aggression potential, based on findings from neuroendocrinology research. Using AI-measured fWHR data for Execucomp CFOs and financial data from Compustat, we find a negative association between overall debt maturity and CFOs’ fWHR, even after controlling for factors such as facial trustworthiness, overconfidence, economic incentives, CEO traits, firm characteristics, and fixed effects for firm and year. Furthermore, using loan-level data from DealScan, we find that a CFO’s fWHR is negatively associated with loan maturity but not with other aspects of the loans, such as interest rate spreads, collateralization, and covenants. Our results remain robust when employing difference-in-differences analyses surrounding CFO turnover.

Keywords: Aggression, Debt Maturity, Loan Maturity, Achievement Drive, fWHR