Are optimistic CEOs and pessimistic CFOs the best partners? Evidence from corporate cash holdings

Based on the perspective of corporate cash holdings, this paper explores whether the combination of an optimistic CEO and a pessimistic CFO creates the “best partners.” Using non-financial A-share listed firms in China from 2010 to 2018 and ordinary least squares (OLS) regressions, it empirically examines, for the first time, the combined influence of CEO optimism and CFO pessimism on cash holdings. The results show that firms with an optimistic CEO and a pessimistic CFO hold less cash. This negative compound effect is more pronounced in regions with a strong gambling culture and in non-state-owned enterprises (non-SOEs). Further analyses show that the CFO’s board membership and CEO–CFO education differences also condition this effect. The study contributes to upper echelons theory and enriches research on determinants of corporate cash holdings.

Huixiang Zeng, Limin Zheng, Xiaoyu Li, Yutong Zhang, Linrong Chen