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Reaffirming the CEO effect is significant and much larger than chance: A comment on Fitza (2014)

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  • Timothy J. Quigley
  • Scott D. Graffin

Abstract

A recent study by Fitza argued that the prior estimates of the Chief Executive Officer (CEO) effect are conflated with events outside the CEO's control, are largely the result of random chance, and that the true CEO effect is smaller than has been previously estimated. We suggest that the empirical methodology employed by Fitza to support these claims substantially overstates the “random chance” element of the CEO effect. We replicate Fitza's findings, highlight methodological issues, offer alternative conclusions, and using multilevel modeling (MLM), suggest that his analyses mischaracterize the CEO effect. Copyright © 2016 John Wiley & Sons, Ltd.

Suggested Citation

  • Timothy J. Quigley & Scott D. Graffin, 2017. "Reaffirming the CEO effect is significant and much larger than chance: A comment on Fitza (2014)," Strategic Management Journal, Wiley Blackwell, vol. 38(3), pages 793-801, March.
    • Handle: RePEc:bla:stratm:v:38:y:2017:i:3:p:793-801
    DOI: 10.1002/smj.2503
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    References listed on IDEAS

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    1. Timothy J. Quigley & Donald C. Hambrick, 2015. "Has the “CEO effect” increased in recent decades? A new explanation for the great rise in America's attention to corporate leaders," Strategic Management Journal, Wiley Blackwell, vol. 36(6), pages 821-830, June.
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    5. Markus A. Fitza, 2014. "The use of variance decomposition in the investigation of CEO effects: How large must the CEO effect be to rule out chance?," Strategic Management Journal, Wiley Blackwell, vol. 35(12), pages 1839-1852, December.
    6. Thomas H. Brush & Philip Bromiley, 1997. "What does a small corporate effect mean? A variance components simulation of corporate and business effects," Strategic Management Journal, Wiley Blackwell, vol. 18(10), pages 825-835, November.
    7. Alison Mackey, 2008. "The effect of CEOs on firm performance," Strategic Management Journal, Wiley Blackwell, vol. 29(12), pages 1357-1367, December.
    8. Margaret Peteraf & Randal Reed, 2007. "Managerial discretion and internal alignment under regulatory constraints and change," Strategic Management Journal, Wiley Blackwell, vol. 28(11), pages 1089-1112, November.
    9. Richard P. Rumelt, 1991. "How much does industry matter?," Strategic Management Journal, Wiley Blackwell, vol. 12(3), pages 167-185, March.
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    Cited by:

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