In Sickness and in Health: Firm Performance and Managerial Health
Sara B. Holland
University of Georgia - C. Herman and Mary Virginia Terry College of Business
Virginia Polytechnic Institute & State University - Department of Finance, Insurance, and Business Law
October 1, 2012
We examine how managerial health affects firm value and policies using the insight that managerial effort depends in part on the health of the manager and health is part of human capital. Using hand-collected samples of non-sudden deaths and medical leaves of top managers, we find that firm value is considerably lower and corporate financial policies are largely less precarious in the years preceding the death of the manager. There is also some evidence that R&D intensity falls. In addition, the stock price declines by about two percent when top managers take medical leaves. Chronic conditions such as cancer primarily produce these effects. Overall, our results suggest that the medical condition of top managers has important consequences for the performance and financial policies of firms.
Number of Pages in PDF File: 52
JEL Classification: G3, G31, G32, I1, K22
Date posted: October 4, 2012 ; Last revised: October 8, 2012
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