Abstract

http://ssrn.com/abstract=1805028
 
 

References (45)



 
 

Citations (15)



 


 



Managers Who Lack Style: Evidence from Exogenous CEO Changes


C. Edward Fee


Tulane University - A.B. Freeman School of Business

Charles J. Hadlock


Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management

Joshua R. Pierce


University of Kentucky - Gatton College of Business and Economics

March 2, 2011


Abstract:     
We study managerial style effects in investment decisions, financing policies, and firm profitability by examining exogenous CEO changes arising from deaths, health issues, and natural retirements. In a comprehensive panel of 8,615 Compustat firms from 1990 to 2007, we find that policy changes and profitability changes subsequent to exogenous turnover do not display abnormally high levels of variability. This evidence casts serious doubt on the hypothesis that managerial style effects play a causal role in firms' investment and financing decisions. We do detect abnormally high levels of variation in policies and profitability after endogenous leadership changes arising from forced CEO turnover. While this is unlikely to reflect a causal relation, it does suggest that underperforming firms tend to simultaneously change both managers and policies. In contrast to prior work, we find no convincing evidence that managers who serve at multiple firms tend to adopt a common style across employers. We also offer some methodological points on testing for the presence of managerial style effects in corporate decisions.

Number of Pages in PDF File: 54

Keywords: Managerial style, CEO turnover, investment decisions, financing policies, manager-specific effects

JEL Classification: G30, G31, G32


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Date posted: April 9, 2011  

Suggested Citation

Fee, C. Edward and Hadlock, Charles J. and Pierce, Joshua R., Managers Who Lack Style: Evidence from Exogenous CEO Changes (March 2, 2011). Available at SSRN: http://ssrn.com/abstract=1805028 or http://dx.doi.org/10.2139/ssrn.1805028

Contact Information

C. Edward Fee (Contact Author)
Tulane University - A.B. Freeman School of Business ( email )
7 McAlister Drive
New Orleans, LA 70118
United States
Charles J. Hadlock
Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management ( email )
315 Eppley Center
East Lansing, MI 48824-1121
United States
517-353-9330 (Phone)
517-432-1080 (Fax)
Joshua R. Pierce
University of Kentucky - Gatton College of Business and Economics ( email )
550 South Limestone
Lexington, KY 40506
United States
859-257-2882 (Phone)
859-257-9688 (Fax)
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