CEO and CFO Personality Differences and Cash Holdings

In this paper, I investigate the association of CEO personality and the difference of CEO and CFO personality on the level of cash holdings. Based on a sample of US publicly listed firms for 2002-2019, I find first that CEOs three personality traits (conscientiousness, extraversion and agreeableness) positively affect cash holdings. While the other two traits (openness and neuroticism) negatively affects a firms cash holding. Second, the CEOs tenure and financial distress of a firm affects this relationship. Third, I also find that CEO and CFO personality differences are negatively associated with firm cash holdings, and the negative association is more pronounced when there is low similarity between CEO and CFO . Further analysis reveals that the negative association between CEO and CFO personality and cash holdings is less pronounced in financial constrained firms and in firms with no CEO duality, smaller boards, smaller proportion of independent directors and higher gender ratio. The study is robust to different regression specifications, multiple sets of control variables, additional analysis and alternative cash holdings measures. Together, my results suggest, in line with the upper-echelon theory, CEO (and CFO) personality are an important factor that affect the firm’s cash holding level