Managerial Macro-Cognition and the Speed of Leverage Adjustment

Abstract

This study takes advantage of the concept of “Managerial Macro-Cognition” (MMC) to explore how does the different macro cognition of executives will affect their capital structure decision. Drawing on a sample of Chinese listed firms from 2002 to 2018, I find that under the same conditions, the enterprise has executives with higher macro cognition can adjust its capital structure faster, the promote effect on the speed of the leverage adjustment caused by the macro cognition of executive is more obvious when cognition is about future. Besides, when the company is faced with financing constraints, tight monetary policy and low equity concentration, the influence of executives’ macro cognition on the adjustment speed is more obvious.