Career Concerns and the Busy Life of the Young CEO

60 Pages Posted: 15 Feb 2011 Last revised: 21 Sep 2017

Xiaoyang Li

Shanghai Jiao Tong University (SJTU)

Angie Low

Nanyang Technological University - Division of Banking & Finance

Anil K. Makhija

Ohio State University (OSU) - Department of Finance

Date Written: March 1, 2014

Abstract

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

Li, Xiaoyang and Low, Angie and Makhija, Anil K., Career Concerns and the Busy Life of the Young CEO (March 1, 2014). Journal of Corporate Finance, Forthcoming; Fisher College of Business Working Paper No. 2011-03-004; Charles A. Dice Center Working Paper No. 2011-4. Available at SSRN: https://ssrn.com/abstract=1761523 or http://dx.doi.org/10.2139/ssrn.1761523

Xiaoyang Li

Shanghai Jiao Tong University (SJTU) ( email )

800 Dongchuan Rd
Minhang, Shanghai 200240
China

Angie Low

Nanyang Technological University - Division of Banking & Finance ( email )

Singapore, 639798
Singapore

Anil K. Makhija (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-1899 (Phone)

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