Download This PaperMade in CEO Factories
53 Pages Posted: 14 Jan 2015 Last revised: 10 Sep 2015
Date Written: September 5, 2015
Abstract
We find that over 20% of CEOs appointed at S&P 1500 firms from 1992 to 2010 came from 36 CEO factories. CEOs originated from CEO factories, factory CEOs, have significantly higher cumulative abnormal returns at the appointment announcement than do non-factory CEOs. We show that CEO factories provide unique leadership development opportunities through which executives acquire general managerial skills. In their first three years, factory CEOs tend to discontinue large, underperforming segments, improve the performance of remaining segments, and invest heavily in R&D. As a result, firms hiring factory CEOs exhibit better long-run performance and award greater CEO compensation.
Keywords: General Managerial Skills; CEO Turnover; CEO Factories; Abnormal Announcement Returns
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Jun Yang
Indiana University - Kelley School of Business - Department of Finance ( email )
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European Corporate Governance Institute (ECGI)
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