Match Made at Birth? What Traits of a Million Swedes Tell Us About CEOs
Renee B. Adams
University of New South Wales; Financial Research Network (FIRN); European Corporate Governance Institute (ECGI)
Aalto University - School of Business; Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)
London Business School; Centre for Economic Policy Research (CEPR); Research Institute of Industrial Economics (IFN)
May 13, 2014
IFN Working Paper No. 1024
FIRN Research Paper
This paper analyzes the role three personal traits — cognitive and non-cognitive ability, and height — play in the market for CEOs. We merge data on the traits of more than one million Swedish males, measured at age 18 in a mandatory military enlistment test, with comprehensive data on their income, education, profession, and service as a CEO of any Swedish company. We find that the traits of large-company CEOs are at par or higher than those of other high-caliber professions. For example, large-company CEOs have about the same cognitive ability, and about one-half of a standard deviation higher non-cognitive ability and height than medical doctors. Their traits compare even more favorably with those of lawyers. The traits contribute to pay in two ways. First, higher-caliber CEOs are assigned to larger companies, which tend to pay more. Second, the traits contribute to pay over and above that driven by firm size. We estimate that 27-58% of the effect of traits on pay comes from CEO’s assignment to larger companies. Our results are consistent with models where the labor market allocates higher-caliber CEOs to more productive positions.
Number of Pages in PDF File: 56
Keywords: CEO, cognitive ability, non-cognitive ability, height, compensation, firm size
JEL Classification: G30, J24, J31
Date posted: May 15, 2014 ; Last revised: August 27, 2014
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