CFO superstitions and the cost of debt: Evidence from Chinese “zodiac year” beliefs

Superstition remains prevalent in human societies despite economic and social advancement, influencing the decision-making of both individuals and corporate executives. In this paper, we examine CFOs' superstitious beliefs and their association with corporate financing decisions. Using the Chinese superstition of the “zodiac year”, we find that firms led by CFOs in their zodiac year tend to have higher debt financing costs. Mechanism tests suggest that firms with zodiac-year CFOs rely more heavily on longer-maturity debt, which mitigates short-term refinancing pressure but is associated with higher debt financing costs. The association between CFOs' zodiac year beliefs and cost of debt is stronger in firms with poorer performance and in firms where CFOs possess greater power. This study enriches the literature on corporate financing by emphasizing the importance of CFO superstitions.