Accounting and Auditing Studies

Accounting and Auditing Studies

A Causal Model of Decision-Making by Financially Experienced Managers: Analyzing the Direct and Indirect Effects on Corporate Financial Asset Growth

Document Type : Original Article

Authors
Maryam Sadat Tabatabaeian 1
Akram Raei Dehaghi 2
Zahra Masoumi Bilondi 3
Mohammad Hossein Fatheh 3
1 Assistant Professor, Department of Accounting, Faculty of Management and Accounting, Payame Noor University, Tehran, Iran
2 M.Sc. in Accounting, Department of Accounting, Faculty of Management and Accounting, Payame Noor University, Tehran, Iran
3 Assistant Professor, Department of Accounting, Faculty of Management & Accounting, Payame Noor University, Tehran, Iran
10.22034/iaas.2026.251765
Abstract
This study examines the effect of the CEO’s financial background on firms’ propensity toward financialization, with particular emphasis on the mediating roles of managerial overconfidence and financing constraints. The sample consists of non-financial firms listed on the Tehran Stock Exchange over the period 2014–2023. After data screening, 1,475 firm-year observations were retained for analysis. The study employs panel data regression techniques within an applied research framework. The findings indicate that a CEO’s financial background has a direct and positive effect on the level of corporate financialization. However, managerial overconfidence does not play a significant mediating role in the relationship between the CEO’s financial background and financialization. This result suggests that, within the institutional and structural context of the firms examined, financialization decisions are driven more by economic and structural constraints than by managerial behavioral biases. In contrast, financing constraints emerge as a key economic mechanism that significantly shapes and moderates the transmission channel through which a CEO’s financial background affects corporate financialization. Moreover, in large firms with low operating cash flows, the relationship between the CEO’s financial background and financialization becomes negative. By challenging the prevailing view that managerial financial experience uniformly amplifies corporate financialization, this study demonstrates that the impact of managerial characteristics is contingent, non-linear, and highly dependent on firms’ liquidity conditions. The results further highlight the importance of aligning executive selection with firms’ financial positions and liquidity constraints, cautioning against reliance on managerial financial experience alone without considering structural limitations. These findings offer valuable implications for boards of directors, corporate governance policymakers, and capital market regulators in designing effective mechanisms for managerial evaluation and oversight.
Keywords
CEO Financial Background
Corporate Financialization
Managerial Overconfidence
Financial Constraints
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Accounting and Auditing Studies
Volume 15, Issue 58
Spring 2026
Pages 109-130