The impact of CEO education on convertible bond issuance

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We examine the impact of managerial education on a firm’s decision to issue convertible bonds instead of standard, non-hybrid securities. Upper echelons theory argues that better managerial education attainment fosters a higher ability to process complex information and tolerate ambiguity. Exploiting convertible bonds’ higher degree of complexity, relative to seasoned equity and straight bonds, we hypothesise that Chief Executive Officers (CEOs) with higher education levels are more likely to issue convertible bonds instead of non-hybrid security types. A multinomial probit model analysing firms’ choice between convertibles, seasoned equity, and straight bonds provides evidence consistent with this hypothesis. A one-level increase in a CEO’s highest academic degree raises the likelihood of substituting convertibles for non-hybrid securities by 2.86%, after controlling for standard corporate security choice determinants. Chief Financial Officer (CFO) education levels, by contrast, have no significant impact on convertible bond issuance. Consistent with higher managerial education attainment being associated with a higher cognitive ability, we also find a positive association between CEO education levels and the level of complexity in convertible bond design. Our findings, which hold under a range of alternative specifications, illustrate the influence of CEOs’ personal characteristics on securities issuance and design.
Original languageEnglish
Pages (from-to)1-24
Number of pages24
JournalEuropean Journal of Finance
Publication statusPublished - 17 Oct 2022


  • CEO education
  • complexity
  • convertible debt
  • convertible design
  • security choice


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