Career Concerns and the Busy Life of the Young CEO
Charles A. Dice Center Working Paper No. 2011-4
60 Pages Posted: 15 Feb 2011 Last revised: 21 Sep 2017
Date Written: March 1, 2014
We examine how real investment decisions of younger and older Chief Executive Officers (CEOs) are affected by their career concerns. Relative to their older counterparts, younger CEOs are more likely to enter new lines of business and exit from existing ones. They prefer growth through acquisitions and undertake bolder investment activities. This busier investment style of the younger CEOs appears not to hurt firm efficiency. Selection of younger CEOs by restructuring firms, omitted CEO characteristics, and tenure effects cannot explain the age-investment relation. Additional results also shed light on how CEO favouritism distorts capital allocation within firms.
Keywords: Career Concerns, CEO Age, Real Investments, Restructing
JEL Classification: G34
Suggested Citation: Suggested Citation