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CEO age, shareholders’ monitoring and organic growth among European firms

Author

Listed:
  • Giorgio Barba Navaretti

    (Univesity of Milan)

  • Davide Castellani

    (Henley Buisness School, University of Reading)

  • Fabio Pieri

    (University of Trento)

Abstract

We examine the relation between CEO age and firm organic growth in a large sample of mostly privately held European manufacturing firms of all size classes. Firms managed by a young CEO grow faster in terms of both sales and assets. Results are robust to the inclusion of a large vector of firm and CEO characteristics and to controls for time horizon, survival bias and endogeneity. We hypothesize that this relation is explained by an incentive of young CEOs to boost firm growth both to signal their talent in the market for managers and to get a longer stream of future compensation benefits. This may create an agency problem, due to a divergence of this corporate strategy from shareholders’ targets. In line with this hypothesis, a larger blockholder ownership, allowing for a more effective monitoring, moderates the relation between CEO age and firm growth.

Suggested Citation

  • Giorgio Barba Navaretti & Davide Castellani & Fabio Pieri, 2019. "CEO age, shareholders’ monitoring and organic growth among European firms," Development Working Papers 455, Centro Studi Luca d'Agliano, University of Milano.
    • Handle: RePEc:csl:devewp:455
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    File URL: https://dagliano.unimi.it/wp-content/uploads/2020/01/WP455.pdf
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    Cited by:

    1. Coad, Alexander & Bauer, Péter & Domnick, Clemens & Harasztosie, Péter & Pál, Rozália & Teruel, Mercedes, 2023. "Which European firms were hardest hit by COVID-19?," EIB Working Papers 2023/05, European Investment Bank (EIB).
    2. 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; blockholder ownership; 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
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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