Early-Life War Experiences and Corporate Financial Outcomes

This paper examines early-life exposure to war experiences among a comprehensive sample of corporate managers and their subsequent tendency towards leverage, cash-holding, investments and M&A activity. Drawing data from the well-document and severe Japanese experience in WW2, we show managers who survived such experiences in their pre-adolescence demonstrate distinct behavioral patterns of financial decision-making in later life. Specifically, they tend to borrow more, hold less cash, invest more in capital expenditure but engage less in M&A deals. This can be understood in the context of ‘what doesn’t kill you makes you stronger' and in this case, more risk-seeking. Extended analyses confirm that the tendency could be driven by managerial traits of being locally altruistic. In the economic significance tests, we find that the tendency is welcomed by stock market participants.