Abstract

http://ssrn.com/abstract=606527
 
 

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Founder-Ceos, Investment Decisions, and Stock Market Performance


Rüdiger Fahlenbrach


Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute

August 8, 2007

Dice Center Working Paper No. 2004-20
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
Fisher College of Business Working Paper No. 2004-01-001

Abstract:     
Eleven percent of the largest public U.S. firms are headed by the CEO who founded the firm. Founder-CEO firms differ systematically from successor-CEO firms with respect to firm valuation, investment behavior, and stock market performance. Founder-CEO firms invest more in R&D, have higher capital expenditures, and make more focused mergers and acquisitions. An equal-weighted investment strategy that had invested in founder-CEO firms from 1993{2002 would have earned a benchmark- adjusted return of 8.3% annually. The excess return is robust; after controlling for a wide variety of firm characteristics, CEO characteristics, and industry affiliation, the abnormal return is still 4.4% annually. The implications of the investment behavior and stock market performance of founder-CEO led firms are discussed.

Number of Pages in PDF File: 51

Keywords: Founder-CEOs, managerial characteristics, corporate behavior

JEL Classification: G32, G34

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Date posted: October 19, 2004 ; Last revised: August 7, 2008

Suggested Citation

Fahlenbrach, Rüdiger, Founder-Ceos, Investment Decisions, and Stock Market Performance (August 8, 2007). Dice Center Working Paper No. 2004-20; Journal of Financial and Quantitative Analysis (JFQA), Forthcoming; Fisher College of Business Working Paper No. 2004-01-001. Available at SSRN: http://ssrn.com/abstract=606527 or http://dx.doi.org/10.2139/ssrn.606527

Contact Information

Rüdiger Fahlenbrach (Contact Author)
Ecole Polytechnique Fédérale de Lausanne ( email )
Quartier UNIL-Dorigny
Extranef 211
1015 Lausanne, CH-1015
Switzerland
++41-21-693-0098 (Phone)
++41-21-693-3010 (Fax)
HOME PAGE: http://sfi.epfl.ch/fahlenbrach.html
Swiss Finance Institute ( email )
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

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