Abstract

http://ssrn.com/abstract=2307159
 
 

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CEO Investment Cycles


Yihui Pan


University of Utah - Department of Finance

Tracy Yue Wang


University of Minnesota - Twin Cities - Carlson School of Management

Michael S. Weisbach


Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER)

January 15, 2015

Charles A. Dice Center Working Paper No. 2013-12
Fisher College of Business Working Paper No. 2013-03-12

Abstract:     
This paper documents the existence of a CEO Investment Cycle, in which disinvestment decreases over CEO tenure while investment increases, leading to “cyclical” firm growth in assets as well as in employment. The estimated variation in investment rate over the CEO cycle is of the same order of magnitude as the differences caused by business cycles or financial constraints. This investment cycle appears to reflect CEOs’ preference for investment growth, which leads to increasing investment quantity and decreasing investment quality over time as the CEO gains more control over his board.

Number of Pages in PDF File: 63

Keywords: Investment, disinvestment, non-performance motivated CEO turnover, CEO control of the board, overinvestment.

JEL Classification: G32, G34, M12, M51

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Date posted: August 16, 2013 ; Last revised: January 23, 2015

Suggested Citation

Pan, Yihui and Wang, Tracy Yue and Weisbach, Michael S., CEO Investment Cycles (January 15, 2015). Charles A. Dice Center Working Paper No. 2013-12; Fisher College of Business Working Paper No. 2013-03-12. Available at SSRN: http://ssrn.com/abstract=2307159 or http://dx.doi.org/10.2139/ssrn.2307159

Contact Information

Yihui Pan
University of Utah - Department of Finance ( email )
David Eccles School of Business
Salt Lake City, UT 84112
United States
Tracy Yue Wang
University of Minnesota - Twin Cities - Carlson School of Management ( email )
19th Avenue South
Minneapolis, MN 55455
United States
Michael S. Weisbach (Contact Author)
Ohio State University (OSU) - Department of Finance ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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