Does the leverage of a company differ when led by a CEO from a reputable university?

Abstract

This study investigates the influence of the educational background of Chief Executive Officers (CEOs) from reputable universities on corporate leverage. Company leverage is an important financial policy that determines a company’s success. A review grounded in upper echelons theory indicates a correlation among CEO characteristics, strategic decisions, and corporate outcomes, with financial leverage serving as the representation in this study. The study was conducted on top-rated Environmental, Social, and Governance (ESG) companies in Southeast Asia during 2020–2022 using 1108 observations. Data were obtained from annual reports, company websites, and Refinitiv, and analyzed using regression. The results indicate that CEOs with an educational background from reputable universities tend to have lower leverage. This suggests that CEOs from prestigious universities tend to exhibit risk-averse tendencies when formulating or executing company debt policies. This study contributes to the literature on the correlation between CEO educational backgrounds and firms’ leverage, providing insight into the relationship between CEOs from reputable universities and the level of corporate leverage. It is also expected to contribute to the development of Upper Echelons Theory and the implementation of company policies such as CEO qualifications, CEO recruitment, and debt policy.

Keywords

• CEO educational background
• Educational quality
• Leverage
• Reputable university
• Top-rated companies