From campus to boardroom: CEO education and its influence on corporate policies

Abstract Unlike the previous literature, this study develops a comprehensive index of CEO education that considers levels and quality in bachelor’s, master’s, and doctoral (PhD) programs and examines how they relate to corporate policies such as capital expenditures, research and development expenditures (R&D), leverage, liquidity, and dividends. The findings indicate that the quality and level of PhD education are positively associated with R&D and liquidity but are negatively associated with leverage and capital expenditures. The quality and level of master’s education negatively impact R&D, leverage, and liquidity. Bachelor’s degree is positively associated with dividends and leverage but negatively impacts R&D and liquidity. The propensity score matching, however, does not support the baseline results concerning the positive impact of having a bachelor’s degree on capital expenditures. Extended analyses suggest that powerful CEOs with a higher level and quality of education tend to make decisions with excessive risk or poor-quality decision-making. Additionally, the media’s intensive coverage of CEOs with a higher level and quality of education increases their desire to pursue conservative corporate policies.