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Are generalists beneficial to corporate shareholders? Evidence from sudden deaths

Author

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  • Betzer, André
  • Ibel, Maximilian
  • Lee, Hye Seung
  • Limbach, Peter
  • Salas, Jesus M.

Abstract

This study documents a positive, economically meaningful impact of executives' general managerial skills on shareholder value. Examining 171 sudden executive deaths over thirty years, we find that a one-standard-deviation increase in the general ability index corresponds to at least a 1.5 percentage point decrease in abnormal stock returns to death announcements. Generalists are found to be significantly more valuable for firms with fewer growth prospects where difficult tasks (e.g., restructurings) need to be performed and adaptations to changing business environments become necessary. Our results provide a market-based explanation for the documented generalist hiring premium and the increasing share of generalists.

Suggested Citation

  • Betzer, André & Ibel, Maximilian & Lee, Hye Seung & Limbach, Peter & Salas, Jesus M., 2016. "Are generalists beneficial to corporate shareholders? Evidence from sudden deaths," CFR Working Papers 16-12, University of Cologne, Centre for Financial Research (CFR).
  • Handle: RePEc:zbw:cfrwps:1612
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    References listed on IDEAS

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    More about this item

    Keywords

    executive heterogeneity; managerial work experience; firm value;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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