Career Concerns and the Busy Life of the Young CEO
Cheung Kong Graduate School of Business
Nanyang Technological University - Division of Banking & Finance
Anil K. Makhija
Ohio State University (OSU) - Department of Finance
July 21, 2011
Charles A. Dice Center Working Paper No. 2011-4
Fisher College of Business Working Paper No. 2011-03-004
Using U.S. plant-level data for firms across a broad spectrum of industries, we compare how career concerns affect the real investment decisions of younger and older CEOs. In contrast to prior research which has examined some specialized labor markets, we find that younger CEOs undertake more active, bolder investment activities, consistent with an attempt on their part to signal confidence and superior abilities. They are more likely to enter new lines of business, as well as exit from existing lines of business. They prefer growth through acquisitions, while older CEOs prefer to build new plants. This busier investment style of the younger CEOs appears not to hurt firm efficiency since younger CEOs are associated with equally high plant-level efficiency compared to older CEOs.
Number of Pages in PDF File: 51
Keywords: Career Concerns, CEO Age, Real Investments, Restructing
JEL Classification: G34working papers series
Date posted: February 15, 2011 ; Last revised: July 22, 2011
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