CEO Age and Inventory Conversion Efficiency: The Role of CEO Tenure and the Effects of Firm Size and Industry

This paper examines the relationship between CEO age and inventory conversion efficiency, using two main operational indicators, inventory turnover and Cash Conversion Cycle (CCC). This study examines the implications of the Upper Echelons Theory (UET), which suggests that characteristics of executives significantly influence organizational effectiveness. It particularly examines how age-related cognitive abilities and risk preferences influence daily operations. The paper is based on a panel data set of 30,781 publicly traded U.S firms-years between 1992 and 2024, and a multivariate regression model in STATA. The results show a statistically significant and positive relationship between the age of the CEO and the cash conversion cycle, which implies that older CEOs are associated with a longer cash conversion cycle and possibly less efficient working capital management. However, the analysis showed that there is no significant relationship between the age of the CEO and inventory turnover, which suggests that age does not directly affect inventory turnover. The relationship between the age of the CEO and CCC is also stronger in larger firms, considering the size of the company as a key factor affecting the relationship between the two. The findings also project the UET onto operational performance, where executive demographics play an important role in liquidity management strategies. The research has tremendous theoretical and practical implications for companies to utilize the CEO characteristics data in their governance strategies, succession planning, and decision-making processes regarding inventory and investments, especially in industries with high capital investment or rapidly changing sectors.