CEO Tenure and Firm Value
50 Pages Posted: 3 Jul 2015 Last revised: 10 Aug 2021
Date Written: December 22, 2020
Our study is the first to provide systematic evidence of a hump-shaped CEO tenure-firm value relation. Cross-sectionally, firm value starts to decline after fewer years of CEO tenure in more dynamic industries, if CEOs are less adaptable to changes, and in the presence of greater labor market frictions. Overall, the dynamics of CEO-firm match quality appear to be a first-order driver of the CEO tenure-firm value association, as explained by CEO characteristics (adaptability), firm/industry characteristics (dynamism), and labor market characteristics that facilitate optimal matching between firms and CEOs.
Keywords: CEO adaptability; labor market frictions; environmental dynamics; firm value
JEL Classification: G30, G34, J24
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