CEO personality traits and debt contracting: Evidence from pilot CEOs

Using pilot certificates as a proxy for the personality trait of sensation seeking, which captures the desire for varied, novel, and complex personal sensations and experiences, we find that firms with pilot CEOs use longer-maturity debt financing even when it is more costly than shorter-term debt. Our findings are robust to controlling for potential endogenous matching between firms and CEOs. Our evidence indicates that CEOs with sensation-seeking personality traits prefer long-term debt financing to avoid the liquidity risk associated with short-term debt financing that may hamper other corporate activities motivated by their sensation seeking. •Firms with Pilot CEOs (proxy for sensation-seeking) hold less short-term debt.•Pilot CEO firms issue new debt with longer maturities and higher yield spreads.•Preference for long-term debt is greater for financially constrained pilot CEOs.•Pilot CEOs avoid liquidity risk, which may hamper future investments in M&A or R&D.