Board secretary's financial experience, overconfidence, and SMEs' financing preference: Evidence from China's NEEQ market

This article explains the impact of the board secretary's financial experience on the financing preference from the perspectives of executive behavior and psychology. We use small and medium-sized enterprises (SMEs) listed on China's National Equities Exchange and Quotations (NEEQ) market as an empirical research sample and confirm that SMEs who have board secretaries with financial experience prefer external financing, thus lowering the investment-cash flow sensitivity. Additionally, the empirical conclusions are robust after changing the measurement of financing, expanding the scope of financial experience definition, and removing state-owned SMEs from the sample for robustness testing. We also control for the endogeneity using a placebo test, PSM-DID, and instrumental variables. In further research, we find that overconfident secretaries prefer external financing; secretaries with financial experience can reduce information asymmetry to promote external financing, albeit mostly short-term loans.