Made in CEO Factories

53 Pages Posted: 14 Jan 2015 Last revised: 10 Sep 2015

See all articles by Ye Cai

Ye Cai

Santa Clara University - Leavey School of Business

Merih Sevilir

Indiana University - Kelley School of Business - Department of Finance

Jun Yang

Indiana University - Kelley School of Business - Department of Finance

Date Written: September 5, 2015

Abstract

We find that over 20% of CEOs appointed at S&P 1500 firms from 1992 to 2010 came from 36 CEO factories. CEOs originated from CEO factories, factory CEOs, have significantly higher cumulative abnormal returns at the appointment announcement than do non-factory CEOs. We show that CEO factories provide unique leadership development opportunities through which executives acquire general managerial skills. In their first three years, factory CEOs tend to discontinue large, underperforming segments, improve the performance of remaining segments, and invest heavily in R&D. As a result, firms hiring factory CEOs exhibit better long-run performance and award greater CEO compensation.

Keywords: General Managerial Skills; CEO Turnover; CEO Factories; Abnormal Announcement Returns

Suggested Citation

Cai, Ye and Sevilir, Merih and Yang, Jun, Made in CEO Factories (September 5, 2015). Kelley School of Business Research Paper No. 15-13. Available at SSRN: https://ssrn.com/abstract=2549305 or http://dx.doi.org/10.2139/ssrn.2549305

Ye Cai (Contact Author)

Santa Clara University - Leavey School of Business ( email )

500 El Camino Real
Santa Clara, CA California 95053
United States

Merih Sevilir

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

Jun Yang

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-3395 (Phone)
812-855-5875 (Fax)

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