Competing with Superstars
Management Science, 62(10), 2016, 2842-2858
Posted: 4 Jun 2015 Last revised: 10 Nov 2016
Date Written: April 20, 2016
This paper investigates the effect of superstar CEOs on their competitors. Exploiting shocks to CEO status due to prestigious media awards, we document a significant positive stock market performance of competitors of superstar CEOs subsequent to the award. The effect is more pronounced for competitors who have not received an Award themselves, who are geographically close to an award winner and who are not entrenched. We observe an increase in risk-taking, operating performance and Innovation activity of superstars’ competitors as potential channels for this positive performance. Our results suggest a positive overall welfare impact of corporate superstar systems due to the incentivizing effect on superstars’ competitors.
Keywords: Competition, Firm performance, Risk-taking, Innovation, Awards, CEO
JEL Classification: G30, G31, G32, G34, J31, J33, L25
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