CEO foreign experience and firm leverage: evidence from Vietnam

Abstract

The study examines whether CEOs with foreign experience affect the corporate financing decisions in the Vietnamese market. Foreign-experienced CEOs are defined as those who worked and/or studied abroad before returning to Vietnam. Using a unique, manually collected dataset of 322 non-financial firms listed on the Ho Chi Minh stock exchange (HOSE) from 2013 to 2021, we find that CEOs with international experience are associated with lower financial leverage, suggesting that such leaders generally prefer less financial risk compared to their peers. We propose that this conservatism is likely due to their limited local networks and the weak institutional framework in Vietnam, which mitigate the benefits of their global expertise. Our findings support the notion from existing literature that a scarcity of social connections may cause CEOs to become more risk-averse, prompting them to choose more conservative financial decisions.

Keywords

• CEO foreign experience
• firm leverage
• corporate governance
• PSM approach
• Vietnam
• Corporate Finance