Abstract

http://ssrn.com/abstract=1656614
 
 

References (49)



 
 

Citations (3)



 


 



How Do CEOs Create Value for Their Firms?


Varouj A. Aivazian


University of Toronto - Rotman School of Management

Tat‐kei Lai


Copenhagen Business School - Department of Economics

Mohammad M. Rahaman


Saint Mary's University - Sobey School of Business

March 7, 2011


Abstract:     
Do CEOs really matter for firm performance? And if they do, how does CEO human capital translate into firm value? We investigate these questions using a sample of firms with CEO turnover. We find that when a CEO with more general managerial human capital is matched with a firm relying more on such skills, the firm reduces leverage and invests less in intangibles, relative to firms relying on CEOs with more firm-specific skills. These changes in firm financing and investment policies lower business risk and reduce the costs associated with financial distress, which, in turn, manifest into higher firm value. Our results suggest that CEOs do matter for firm performance, and illustrate possible channels through which CEO human capital can translate into higher firm value.

Number of Pages in PDF File: 36

Keywords: CEO Turnover, CEO Human Capital, Firm Policy, Firm Performance

JEL Classification: G30, J40

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Date posted: August 10, 2010 ; Last revised: March 8, 2011

Suggested Citation

Aivazian, Varouj A. and Lai, Tat‐kei and Rahaman, Mohammad M., How Do CEOs Create Value for Their Firms? (March 7, 2011). Available at SSRN: http://ssrn.com/abstract=1656614 or http://dx.doi.org/10.2139/ssrn.1656614

Contact Information

Varouj A. Aivazian
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Department of Economics
Toronto, Ontario M5S 3E6
Canada
416-978-2375 (Phone)
416-978-5433 (Fax)
Tat-kei Lai
Copenhagen Business School - Department of Economics ( email )
Porcelaenshaven 16 A, 1
Frederiksberg, DK - 2000
Denmark
Mohammad M. Rahaman (Contact Author)
Saint Mary's University - Sobey School of Business ( email )
Halifax, Nova Scotia B3H 3C3
Canada
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