Superstar CEOS

44 Pages Posted: 30 Jun 2008 Last revised: 22 Aug 2010

See all articles by Ulrike Malmendier

Ulrike Malmendier

University of California, Berkeley - Department of Economics; University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Geoffrey A. Tate

University of Maryland - Robert H. Smith School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: June 2008

Abstract

Compensation, status, and press coverage of managers in the U.S. follow a highly skewed distribution: a small number of 'superstars' enjoy the bulk of the rewards. We evaluate the impact of CEOs achieving superstar status on the performance of their firms, using prestigious business awards to measure shocks to CEO status. We find that award-winning CEOs subsequently underperform, both relative to their prior performance and relative to a matched sample of non-winning CEOs. At the same time, they extract more compensation following the award, both in absolute amounts and relative to other top executives in their firms. They also spend more time on public and private activities outside their companies, such as assuming board seats or writing books. The incidence of earnings management increases after winning awards. The effects are strongest in firms with weak governance, even though the frequency of obtaining superstar status is independent of corporate governance. Our results suggest that the ex-post consequences of media-induced superstar status for shareholders are negative.

Suggested Citation

Malmendier, Ulrike and Tate, Geoffrey A., Superstar CEOS (June 2008). NBER Working Paper No. w14140, Available at SSRN: https://ssrn.com/abstract=1152681

Ulrike Malmendier (Contact Author)

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Geoffrey A. Tate

University of Maryland - Robert H. Smith School of Business ( email )

MD
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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