Do CEOS Know Best? Evidence from China

39 Pages Posted: 25 Jun 2018 Last revised: 28 Aug 2022

See all articles by Nicholas Bloom

Nicholas Bloom

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Hong Cheng

Wuhan University

Mark Duggan

Stanford University - Department of Economics

Li Hongbin

Tsinghua University

Franklin Qian

UNC Kenan-Flagler Business School - Finance Department; UNC Kenan-Flagler Business School

Date Written: June 2018

Abstract

We analyze a new management survey for around 1,000 firms and 10,000 employees across two large provinces in China. The unique aspect of this survey is it collected management data from the CEO, a random sample of senior managers and workers. We document four main results. First, management scores, much like productivity, have a wide spread with a long left-tail of poorly managed firms. This distribution of management scores is similar for CEOs, senior managers and workers management, and appears broadly reasonably compared to US scores for similar questions. Moreover, for all groups these scores correlate with firm performance, suggesting all employees within the firm are (at least partly) aware of the their firms’ managerial abilities. Second, the scores across the groups are significantly cross-correlated, but far from completely. This suggests that while different levels of the firm have similar views on the firms’ management capabilities, they do not fully agree. Third, we find that the CEO’s management scores are the most predictive of firm performance, followed by the senior managers and then the workers. Hence, CEOs do appear to know best about their firms management strengths and weaknesses. Fourth, within-firm management score dispersion is negatively correlated with investment and R&D intensity, suggesting long-run planning is linked with greater consistency in management across levels in firms.

Suggested Citation

Bloom, Nicholas and Cheng, Hong and Duggan, Mark and Hongbin, Li and Qian, Franklin, Do CEOS Know Best? Evidence from China (June 2018). NBER Working Paper No. w24760, Available at SSRN: https://ssrn.com/abstract=3202065

Nicholas Bloom (Contact Author)

Stanford University - Department of Economics ( email )

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HOME PAGE: http://economics.stanford.edu/faculty/bloom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Hong Cheng

Wuhan University ( email )

Wuhan
China

Mark Duggan

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

Li Hongbin

Tsinghua University ( email )

Beijing, 100084
China

Franklin Qian

UNC Kenan-Flagler Business School - Finance Department ( email )

UNC Kenan-Flagler Business School ( email )

Chapel Hill, NC
United States

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