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Manager Characteristics and Firm Performance

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  • KODAMA Naomi
  • Huiyu LI

Abstract

This paper studies the relationship between the performance of a firm and the characteristics of its manager for private and public firms in Japan. We use a panel data of firms from 2006-2016 that covers over two-thirds of aggregate employment and is representative of the firm size distribution. We find that firm performance measures—size, growth, and sales per employee—are higher in firms with managers who are male, more educated, and whose self-reported hometown differs from the location of the firm he or she manages (migrant managers). We also find an inverted-U relationship between firm performance level and manager's age, and that growth rate declines with the manager's age. Firm performance first increases with age until middle age, after which it declines with age. However, managers with characteristics that are associated with good performance do not necessarily perform better in recessions: male and migrant managers cut back more on sales and employment during the 2008-2009 recession. These results hold even after controlling for firm characteristics such as industry, age, location, and family ownership. Our results are consistent with human capital and risk preference affecting the productivity of managers. They suggest that demographic shifts—aging, rising female labor participation and education attainment, change in migration patterns—may affect economic growth through the distribution of managerial productivity.

Suggested Citation

  • KODAMA Naomi & Huiyu LI, 2018. "Manager Characteristics and Firm Performance," Discussion papers 18060, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:18060
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    File URL: https://www.rieti.go.jp/jp/publications/dp/18e060.pdf
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    References listed on IDEAS

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    1. James Feyrer, 2011. "The US productivity slowdown, the baby boom, and management quality," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(1), pages 267-284, January.
    2. Eric Bartelsman & John Haltiwanger & Stefano Scarpetta, 2013. "Cross-Country Differences in Productivity: The Role of Allocation and Selection," American Economic Review, American Economic Association, vol. 103(1), pages 305-334, February.
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