Do CEOs matter?
AbstractEstimating the value of top managerial talent is a central topic of research that has attracted widespread attention from academics and practitioners. Yet, studying the impact of managers on firm performance is difficult because of endogeneity and omitted variables concerns. In this paper, we test for the impact of managers on firm performance in two ways. First, we examine whether top executive deaths have an impact on firm performance, focusing on the manager and firm characteristics that are associated to large manager-death effects. Second, we test for the interaction between the personal and professional activities of managers by examining the effect of deaths of immediate family members (spouses, parents, children, etc) on firm performance. Our main findings are three. First, CEO deaths are strongly correlated with declines in firms operating profitability, asset growth and sales growth. Second, the death of board members does not seem to affect firm prospects, indicating that not all senior managers are equally important for firms' outcomes. Third, CEOs' immediate family deaths are significantly negatively correlated to firm performance. This last result suggests a strong link between the personal and business roles that top management plays, a connection that is present even in large firms. Overall, our findings demonstrate CEOs are extremely important for firms' prospects.
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Bibliographic InfoPaper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2006-21.
Length: 34 p.
Date of creation: Mar 2007
Date of revision:
Note: First draft: October 15, 2006
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-18 (All new papers)
- NEP-BEC-2007-08-18 (Business Economics)
- NEP-EFF-2007-08-18 (Efficiency & Productivity)
- NEP-HRM-2007-08-18 (Human Capital & Human Resource Management)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- What do bosses do?
by chris dillow in Stumbling and Mumbling on 2007-08-30 10:25:57
- Prix du livre d'Ã©conomie du SÃ©nat : Laurent Mauduit, petits conseils
by Alexandre Delaigue in Econoclaste on 2007-11-11 14:20:55
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