65 Pages Posted: 3 Jul 2015 Last revised: 30 Nov 2016
Date Written: November 30, 2016
We examine how CEOs’ impact on firm value varies over time. We document a hump-shaped relation between CEO tenure and firm value which is subject to meaningful variation depending on industry dynamics, the business cycle, and CEOs’ adaptability to changes. Semi-parametric estimations, stock returns to sudden deaths and to takeover announcements, as well as tests for extrapolation, survivorship, and endogenous CEO-firm matching and turnover confirm our results. They suggest that a considerable fraction of high-tenure CEOs is no longer the optimal match for their firms which seem to have difficulties, due to governance rather than labor market frictions, replacing incumbent CEOs.
Keywords: CEO adaptability, (within-)CEO heterogeneity, CEO tenure, CEO term limits, environmental dynamics, firm value, investments
JEL Classification: G30, G34, J24
Suggested Citation: Suggested Citation
Limbach, Peter and Schmid, Markus M. and Scholz-Daneshgari, Meik, Do CEOs Matter? Corporate Performance and the CEO Life Cycle (November 30, 2016). Paris December 2015 Finance Meeting EUROFIDAI - AFFI; University of St.Gallen, School of Finance Research Paper No. 2015/11. Available at SSRN: https://ssrn.com/abstract=2626340 or http://dx.doi.org/10.2139/ssrn.2626340