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How Much Do CEOS Influence Firm Performance - Really?

42 Pages Posted: 12 Oct 2005  

Alison Mackey

Ohio State University (OSU) - Fisher College of Business

Date Written: September 1, 2005

Abstract

The extent to which CEOs influence firm performance is fundamental to scholarly understanding of how organizations work; yet, this linkage is poorly understood. Previous empirical efforts to examine the link between CEOs and firm performance using variance decomposition, while provocative, nevertheless suffer from methodological problems that systematically understate the relative impact of CEOs on firm performance compared to industry and firm effects. This paper identifies and corrects these methodological problems and then re-examines the percentage of the variance in firm performance explained by heterogeneity in CEOs. When correctly estimated, the "CEO effect" on corporate-parent performance is substantially more important than that of industry and firm effects, but only moderately more important than industry and firm effects on business-segment performance.

Keywords: CEO, firm performance, leadership effects

Suggested Citation

Mackey, Alison, How Much Do CEOS Influence Firm Performance - Really? (September 1, 2005). Available at SSRN: https://ssrn.com/abstract=816065 or http://dx.doi.org/10.2139/ssrn.816065

Alison Mackey (Contact Author)

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

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