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Which CEO Characteristics and Abilities Matter?

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  • Steven N. Kaplan
  • Mark M. Klebanov
  • Morten Sorensen

Abstract

We study the characteristics and abilities of CEO candidates for companies involved in buyout (LBO) and venture capital (VC) transactions and relate them to hiring decisions, investment decisions, and company performance. Candidates are assessed on more than thirty individual abilities. The abilities are highly correlated; a factor analysis suggests there are two primary factors with intuitive characterizations -- one for general ability and one that contrasts team-related, interpersonal skills with execution skills. Both LBO and VC firms are more likely to hire and invest in CEOs with greater general abilities, both execution- and team-related. Success, however, is more strongly related to execution skills than to team-related skills. Success is, at best, only marginally related to incumbency, holding observable talent and ability constant.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14195.

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Date of creation: Jul 2008
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Publication status: published as Author(s): STEVEN N. KAPLAN, MARK M. KLEBANOV, MORTEN SORENSEN Published: May 21, 2012 Pages: 973-1007 DOI: 10.1111/j.1540-6261.2012.01739.x
Handle: RePEc:nbr:nberwo:14195

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Cited by:
  1. Camelia M. Kuhnen & Andrea L. Eisfeldt, 2010. "CEO Turnover in a Competitive Assignment Framework," 2010 Meeting Papers 1081, Society for Economic Dynamics.
  2. Loureiro, Gilberto & Makhija, Anil K. & Zhang, Dan, 2011. "Why Do Some CEOs Work for a One-Dollary Salary?," Working Paper Series 2011-7, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  3. Francisco Gallego & Borja Larraín, 2010. "CEO Compensation among Firms Controlled by Large Shareholders: Evidence from Emerging Markets," Documentos de Trabajo, Instituto de Economia. Pontificia Universidad Católica de Chile. 379, Instituto de Economia. Pontificia Universidad Católica de Chile..
  4. Goodall, Amanda H. & Kahn, Lawrence M. & Oswald, Andrew J., 2011. "Why do leaders matter? A study of expert knowledge in a superstar setting," Journal of Economic Behavior & Organization, Elsevier, vol. 77(3), pages 265-284, March.
  5. Gallego, Francisco & Larrain, Borja, 2012. "CEO compensation and large shareholders: Evidence from emerging markets," Journal of Comparative Economics, Elsevier, vol. 40(4), pages 621-642.

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