Abstract

http://ssrn.com/abstract=2155756
 


 



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

Ugur Lel


Virginia Polytechnic Institute & State University - Department of Finance, Insurance, and Business Law

August 11, 2015


Abstract:     
This paper examines the importance of CEO characteristics for firm valuation and policies using the insight that managerial effort depends in part on the health of the manager and health is part of human capital. We use CEO health shocks as a time-varying and physical managerial attribute that can change the degree of managerial effort. Using hand-collected data on CEO deaths and medical leaves to identify large health shocks, we find that firm value is considerably lower and corporate financial policies are largely less precarious (lower cash holdings, leverage, and return volatility) in the years preceding the death of the manager compared to a matched sample of firms. Chronic health conditions and weak governance environments primarily produce these effects. Stock prices also decline by about 2% when top managers take medical leaves. Overall, our results suggest that CEO health has important consequences for the performance and financial policies of firms.

Number of Pages in PDF File: 41

JEL Classification: G3, G31, G32, I1, K22


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Date posted: October 4, 2012 ; Last revised: August 13, 2015

Suggested Citation

Holland, Sara B. and Lel, Ugur, In Sickness and in Health: Firm Performance and Managerial Health (August 11, 2015). Available at SSRN: http://ssrn.com/abstract=2155756 or http://dx.doi.org/10.2139/ssrn.2155756

Contact Information

Sara B. Holland (Contact Author)
University of Georgia - C. Herman and Mary Virginia Terry College of Business ( email )
Brooks Hall
Athens, GA 30602-6254
United States
Ugur Lel
Virginia Polytechnic Institute & State University - Department of Finance, Insurance, and Business Law ( email )
1016 Pamplin Hall (0221)
Blacksburg, VA 24060-0221
United States
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