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In Sickness and in Health: Firm Performance and Managerial Health

45 Pages Posted: 4 Oct 2012 Last revised: 6 Jun 2017

Sara B. Holland

University of Georgia - C. Herman and Mary Virginia Terry College of Business

Ugur Lel

University of Georgia - Department of Banking and Finance

Date Written: June 2, 2017

Abstract

We use CEO health shocks as a time-varying and physical managerial attribute that can change the degree of managerial effort. Using hand-collected data on CEO illnesses, deaths, and medical leaves to identify large health shocks, we find that firm value is considerably lower and firm volatility, leverage, and earnings quality decline in the years preceding the death of the manager compared to a matched sample of firms. This decline is larger for chronic health conditions and in firms with high organization capital where key talent is more valuable. Stock prices also decline by about 2% when top managers take medical leaves. Overall, our results suggest that CEO health has important consequences for performance and financial and accounting policies of firms.

JEL Classification: G3, G31, G32, I1, K22

Suggested Citation

Holland, Sara B. and Lel, Ugur, In Sickness and in Health: Firm Performance and Managerial Health (June 2, 2017). Available at SSRN: https://ssrn.com/abstract=2155756 or http://dx.doi.org/10.2139/ssrn.2155756

Sara B. Holland (Contact Author)

University of Georgia - C. Herman and Mary Virginia Terry College of Business ( email )

Brooks Hall
Athens, GA 30602-6254
United States

Ugur Lel

University of Georgia - Department of Banking and Finance ( email )

Terry College of Business
Athens, GA 30602-6253
United States

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