From Playground to Boardroom: Endowed Social Status and Managerial Performance

Abstract

Using U.S. Census Survey data on CEOs’ residence in their formative years, I document a negative relation between CEOs’ endowed family wealth and managerial performance. Consistent with the view that CEOs born into poor families face higher barriers of entry but may possess greater levels of ability that enable them to become CEOs, I find that CEOs born into less-privileged families outperform those from higher-wealth families. The outperformance of CEOs from less-wealthy families is not driven by risk-taking or omitted variables. Overall, my results suggest that the level of CEOs’ social endowment provides a useful signal for their managerial ability.

Keywords: family wealth, endowed social status, firm performance, managerial style, innovation

JEL Classification: G30, G32