Mind the Gap: The Age Dissimilarity between the Chair and the CEO

61 Pages Posted: 4 Sep 2015 Last revised: 25 Dec 2016

See all articles by Marc Goergen

Marc Goergen

IE Business School, IE University; European Corporate Governance Institute (ECGI)

Peter Limbach

University of Cologne and Centre for Financial Research (CFR)

Meik Scholz-Daneshgari

Karlsruhe Institute of Technology

Date Written: August 27, 2015

Abstract

We study the relation between the chair of the board of directors and the CEO. We argue that substantial age dissimilarity between the two - giving rise to cognitive conflict - increases board monitoring and firm value for firms with greater monitoring needs. We find evidence for our hypothesis using data on German two-tier boards. German law mitigates endogeneity concerns as it prevents CEO duality and also restricts CEO power in other ways. Additional identification attempts include CEO-firm and chair-firm fixed effects, random effects, dynamic panel data estimations, and the use of the 2007 financial crisis as an exogenous shock to monitoring needs. We find that during the crisis, when fast decision making and managerial discretion were needed, the link between age dissimilarity and firm value changed.

Keywords: Chair-CEO relation, CEO, chair of the board, cognitive conflict, monitoring, board meetings, firm value

JEL Classification: G3, G39

Suggested Citation

Goergen, Marc and Limbach, Peter and Scholz-Daneshgari, Meik, Mind the Gap: The Age Dissimilarity between the Chair and the CEO (August 27, 2015). Journal of Corporate Finance, Vol. 35, 2015; European Corporate Governance Institute (ECGI) - Finance Working Paper No. 452/2015. Available at SSRN: https://ssrn.com/abstract=2652234 or http://dx.doi.org/10.2139/ssrn.2652234

Marc Goergen (Contact Author)

IE Business School, IE University ( email )

Finance Department
Maria de Molina, 12
Madrid, 28006
Spain

HOME PAGE: http://www.ie.edu/business-school/faculty-and-research/faculty/marc-goergen/

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Peter Limbach

University of Cologne and Centre for Financial Research (CFR) ( email )

Albertus-Magnus-Platz
Köln, 50923
Germany

HOME PAGE: http://www.finance.uni-koeln.de

Meik Scholz-Daneshgari

Karlsruhe Institute of Technology ( email )

Kaiserstraße 12
Karlsruhe, Baden Württemberg 76128
Germany

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