Download this Paper Open PDF in Browser

Superstar CEOs

58 Pages Posted: 23 Mar 2007  

Ulrike Malmendier

University of California, Berkeley - Department of Economics; University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Geoffrey A. Tate

University of North Carolina Kenan-Flagler Business School; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: March 15, 2007

Abstract

We analyze the impact of winning high-profile tournaments on the subsequent behavior of the tournament winner in the context of chief executive officers of U.S. corporations. We find that the firms of CEOs who achieve "superstar" status via prestigious nationwide awards from the business press subsequently underperform beyond mere mean reversion, both relative to the overall market and relative to a sample of "hypothetical award winners" with matching firm and CEO characteristics. At the same time, award-winning CEOs extract significantly more compensation from their company following the award, both in absolute amounts and relative to other top executives in their firm. They also spend significantly more time and effort on public and private activities outside their company such as assuming board seats or writing books. The incidence of earnings management increases significantly after winning awards. Our results suggest that media-induced superstar culture leads to behavioral distortions beyond mere mean reversion. We also find that the effects are strongest in firms with weak corporate governance, suggesting that firms could prevent the negative consequences.

Suggested Citation

Malmendier, Ulrike and Tate, Geoffrey A., Superstar CEOs (March 15, 2007). Available at SSRN: https://ssrn.com/abstract=972725 or http://dx.doi.org/10.2139/ssrn.972725

Ulrike Malmendier

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
(510) 642-8724 (Phone)
(510) 642-6615 (Fax)

HOME PAGE: http://www.econ.berkeley.edu/~ulrike/

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=918

Geoffrey A. Tate (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paper statistics

Downloads
1,152
Rank
6,710
Abstract Views
5,723