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CEO age and organic growth among European firms

Author

Listed:
  • Giorgio Barba Navaretti
  • Davide Castellani
  • Fabio Pieri

Abstract

We examine the relation between the age of CEOs and firm organic growth. In a large sample of mostly privately held European manufacturing firms with more than 10 employees, we find that firms managed by a young CEO grow faster in terms of both sales and assets. Our results are robust to the inclusion of a large vector of firm and CEO characteristics and to controls for endogeneity, survival bias and time horizon. We submit that this relation is explained by an incentive of young CEOs to boost firm growth in order both to signal their talent in the market for managers and to get a longer stream of future compensation benefits. In turn, this may create an agency problem, due to a divergence of this corporate strategy from shareholders’ targets. Consistently, we find that a concentrated ownership, allowing a more effective monitoring, moderates the negative relation between CEO age and firm organic growth.

Suggested Citation

  • Giorgio Barba Navaretti & Davide Castellani & Fabio Pieri, 2019. "CEO age and organic growth among European firms," DEM Working Papers 2019/13, Department of Economics and Management.
    • Handle: RePEc:trn:utwprg:2019/13
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    File URL: https://www.economia.unitn.it/alfresco/download/workspace/SpacesStore/dd380c6a-c289-4cd6-8a17-bad71a8fb46f/DEM2019_13.pdf
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    Cited by:

    1. Bournakis, Ioannis & Papanastassiou, Marina & Papaioannou, Sotiris, 2020. "Multinationals and Domestic TFP: Market Shares, Agglomerations Gains and Foreign Ownership," MPRA Paper 106626, University Library of Munich, Germany.

    More about this item

    Keywords

    Chief Executive Officer; CEO age; organic growth; agency theory; European manufacturing firms;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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