CEO experience and adjustment speed toward target leverage: The case of Vietnam

Abstract

This paper studies the connection between CEO experience and Vietnamese listed firms’ capital adjustment behavior. In the context of Vietnam, we find that experienced CEOs slow down the speed of obtaining the desired ratio of debt, after analyzing a sample of 694 public companies from 2010 to 2019. This pattern can be seen for both under- and over-the-target enterprises when leverage is measured by book and market value. Our findings are in line with other research that shows a negative correlation between CEOs' years of experience and debt levels. We expect that for experienced CEOs, the adjustment benefits are not large enough to substitute for adjustment costs, so they choose not to offset the deviation to the target leverage quicker.