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Which CEO Characteristics and Abilities Matter?
Steven N. Kaplan University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER) Mark M. Klebanov University of Chicago - Graduate School of Business (GSB) Morten Sorensen Columbia Business School; National Bureau of Economic Research (NBER); Swedish Institute for Financial Research (SIFR) July 2008 Swedish Institute for Financial Research Conference on the Economics of the Private Equity Market AFA 2008 New Orleans Meetings Paper Abstract: Using a dataset of assessments of CEO candidates for companies involved in private equity transactions (PE) - buyout (BO) and venture capital (VC) - we study how CEO characteristics and abilities relate to hiring decisions, PE investment decisions, and subsequent performance. CEOs are assessed in seven general areas - leadership, personal, intellectual, motivational, interpersonal, technical and functional. The ratings of different characteristics and abilities are generally correlated. For both BO and VC firms, outside CEO candidates are more highly rated than incumbents. PE firms - both BO and VC - are more likely to hire and invest in more highly rated/talented CEOs. More highly rated CEOs who are hired are more likely to be successful, particularly for buyout-funded companies. In comparing the characteristics that matter for hiring and investment relative to those related to success, we find that characteristics related to executive skills appear undervalued while those related to interpersonal skills appear overvalued.
Keywords: CEO characteristics, private equity Working Paper SeriesDate posted: March 20, 2007 ; Last revised: July 24, 2008Suggested CitationContact Information
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