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Does CEO competence affect enterprises’ financial performance?

Author

Listed:
  • Wang, Xiaoying
  • Li, Yi
  • Fu, Chaoqian
  • Yue, Zhenbang

Abstract

Financial performance is the key to measuring the sustainability of an enterprise, and CEO competence plays a pivotal role in influencing this performance. This study, based on panel data from listed companies in China’s A-share market, employs a two-way fixed effects model to empirically examine the impact of CEO competence on enterprise financial performance and its underlying mechanisms. The results indicate that: CEO enterprising competence has a significant impact on enterprise financial performance, while CEO honing competence does not significantly influence financial performance. Secondly, internal control behavior serves as an effective channel through which CEO competence influences enterprise financial performance. Furthermore, newly appointed CEOs are better equipped to leverage market-oriented enterprising competence to enhance enterprise financial performance compared to long-serving CEOs. This study extends the Ansoff Matrix to develop a multidimensional framework for analyzing CEO competence, thereby enriching the research on the relationship between CEO competence and enterprise performance. It provides a new perspective for CEO selection and development and contributes marginally to the promotion of sound enterprise operations.

Suggested Citation

  • Wang, Xiaoying & Li, Yi & Fu, Chaoqian & Yue, Zhenbang, 2025. "Does CEO competence affect enterprises’ financial performance?," International Review of Economics & Finance, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:reveco:v:99:y:2025:i:c:s1059056025001649
    DOI: 10.1016/j.iref.2025.104001
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    References listed on IDEAS

    as
    1. Yung, Kenneth & Nguyen, Trung, 2020. "Managerial ability, product market competition, and firm behavior," International Review of Economics & Finance, Elsevier, vol. 70(C), pages 102-116.
    2. Yuan Yuan & Gaoliang Tian & Louise Yi Lu & Yangxin Yu, 2019. "CEO Ability and Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 157(2), pages 391-411, June.
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    Cited by:

    1. Kong, Linghui & Chen, Rongquan & Huang, Xinyu & Wang, Fan, 2025. "Can Industry-Specific Information Disclosure Guidelines Alleviate Corporate ESG Divergence? Evidence from Chinese List Companies," International Review of Financial Analysis, Elsevier, vol. 106(C).
    2. Zhong, Linfei & He, Yuanqiong, 2025. "The impact of rookie CEOs on corporate risk-taking," International Review of Financial Analysis, Elsevier, vol. 107(C).
    3. Li, LinBai & Li, BeiWei, 2025. "Impact of inclusive innovation on firm performance," Finance Research Letters, Elsevier, vol. 82(C).
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    5. Su, Yu, 2025. "The hidden cost of geopolitical risk: Corporate violations in China," International Review of Financial Analysis, Elsevier, vol. 105(C).
    6. Fan, Tao & Chen, Keren, 2025. "Unpacking digital economy effects: performance enhancement through supply chain risk management," Finance Research Letters, Elsevier, vol. 84(C).

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    JEL classification:

    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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