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
March 1, 2014
Charles A. Dice Center Working Paper No. 2011-4
Fisher College of Business Working Paper No. 2011-03-004
We examine how real investment decisions of younger and older Chief Executive Officers (CEOs) are affected by their career concerns. Relative to their older counterparts, younger CEOs are more likely to enter new lines of business and exit from existing ones. They prefer growth through acquisitions and undertake bolder investment activities. This busier investment style of the younger CEOs appears not to hurt firm efficiency. Selection of younger CEOs by restructuring firms, omitted CEO characteristics, and tenure effects cannot explain the age-investment relation. Additional results also shed light on how CEO favouritism distorts capital allocation within firms.
Number of Pages in PDF File: 60
Keywords: Career Concerns, CEO Age, Real Investments, Restructing
JEL Classification: G34
Date posted: February 15, 2011 ; Last revised: December 30, 2014
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