Managerial beliefs and corporate financial policies

"We measure the impact of individual managerial beliefs on corporate financing. First, managers who believe that their firm is undervalued view external financing as overpriced, especially equity. We show that such overconfident managers use less external finance and, conditional on accessing risky capital, issue less equity than their peers. Second, CEOs with Depression experience have less faith in capital markets and lean excessively on internal financing. Third, CEOs with military experience pursue more aggressive policies, including heightened leverage. CEOs' press portrayals confirm these differences in beliefs. Overall, measurable managerial characteristics have significant explanatory power beyond traditional capital-structure determinants"--National Bureau of Economic Research web site.