CEO Career Horizon and Tenure: Future Performance Implications under Different Contingencies

30 Pages Posted: 24 Sep 2007 Last revised: 28 Sep 2011

See all articles by Patrick McClelland

Patrick McClelland

Univesity of Kansas

Vincent L. Barker

University of Kansas, School of Business

Date Written: September 12, 2011

Abstract

This paper examines the influence of CEO career horizon and tenure on the future performance of firms. Specifically, we argue that CEOs with shorter career horizons (as measured by their age) will adopt risk-averse strategies that will, on average, adversely influence future firm performance. Further, we argue that at high levels of CEO ownership, this relationship is exacerbated due to the accompanying power that comes with high ownership. In terms of CEO tenure, we propose that CEOs’ paradigms will become increasingly obsolete as their tenure increases with this process hurting future performance in dynamic industries. However, such performance declines may not occur in more stable industries. Using a sample of US-based firms from the S&P 500, we find support for our arguments when examining the future Return on Assets of firms. With market-based performance, we find support for only our career horizon arguments.

Keywords: CEO Career Horizon, CEO Paradigm, Equity Ownership Power, Industry Dynamism, Financial Performance

JEL Classification: M10

Suggested Citation

McClelland, Patrick and Barker, Vincent L., CEO Career Horizon and Tenure: Future Performance Implications under Different Contingencies (September 12, 2011). Available at SSRN: https://ssrn.com/abstract=1016206 or http://dx.doi.org/10.2139/ssrn.1016206

Patrick McClelland

Univesity of Kansas ( email )

1300 Sunnyside Avenue
Lawrence, KS 66045
United States

Vincent L. Barker (Contact Author)

University of Kansas, School of Business ( email )

School of Business
Dept. of Management
Lawrence, KS 66045
United States

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