There is mounting evidence of the influence of personal characteristics of chief executive officers (CEOs) on corporate outcomes. In this paper we analyze the relation between military service of CEOs and managerial decisions, financial policies, and corporate outcomes. Exploiting exogenous variation in the propensity to serve in the military, we show that military service is associated with conservative corporate policies and ethical behavior. Military CEOs pursue lower corporate investment, are less likely to be involved in corporate fraudulent activity, and perform better during industry downturns. Taken together, our results show that military service has significant explanatory power for managerial decisions and firm outcomes.

We study the effects of a contraction in financial intermediation on nonfinancial firms. The Panic of 1907 originated in the shadow banks of the time, New York’s trust companies. The runs were caused by a shock unrelated to the trust companies’ nonfinancial corporate clients. In the years following the panic, corporations affiliated with the worst-affected trusts made fewer capital investments, paid lower dividends, and suffered lower profitability and higher borrowing costs relative to firms without such connections. The shock to New York’s trust companies accounted for at least 18.4 percent of the decline in corporate investment in the United States in 1908.