46 Pages Posted: 4 Oct 2012 Last revised: 31 Mar 2017
Date Written: March 29, 2017
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: Suggested Citation
Holland, Sara B. and Lel, Ugur, In Sickness and in Health: Firm Performance and Managerial Health (March 29, 2017). Available at SSRN: https://ssrn.com/abstract=2155756 or http://dx.doi.org/10.2139/ssrn.2155756