A selection of interesting articles we found recently looking at CEO characteristics and organisational performance.
Gender before age in affecting firm performance?
The issue of CEO age and gender vs. concurrent performance is extensively examined, but the association with subsequent performance has limited treatment in the financial literature, and with conflicting findings. In the current study, the authors examine the association between CEO age and gender, and subsequent company market performance using a more recent set of observations and the standard four-factor model to estimate future cumulative abnormal shareholder returns. They find that subsequent abnormal shareholder returns are marginally significantly higher for female CEOs than for their male counterparts, but no material pattern is observed between CEO age and subsequent abnormal shareholder return performance.
Read further at: Marcelo Eduardo & Brooks Poole. 2016. CEO age and gender: Subsequent market performance.
Cogent Business & Management (2016), 3: 1146389.
CEO legacies, do they play a role?
Do CEOs nearing retirement attempt to boost short-term firm performance or do they care more about what type of legacy they will leave behind? The two opposing predictions about the behaviour of CEOs upon retirement suggest that retiring CEOs’ decisions about certain long-term investment items may be more complex than suggested in the literature. In search of an answer to this question, the author examines the relationship between CEO retirement and the level of firm commitment to corporate social responsibility (CSR).
The results show that CEO retirement has a negative effect on firm commitment to CSR. However, results show that the negative effect becomes weaker when CEOs retire at relatively older ages or are retained on the board of directors of their own firms. This finding suggests that CEOs who face weaker pressure from the labour market for corporate directors may pay more attention to preserving their legacy.
More details are at: Kang, J. 2016. Labor market evaluation versus legacy conservation: What factors determine retiring CEOs’ decisions about long-term investment?
Strategic Management Journal, 37(2), 389–405.
doi: 10.1002/smj.2234
Did owners’ preferences for CEO characteristics change after the GFC?
Chiara Mio, Marco Fasan & Antonio Ros set out. to study whether and how owners’ preferences for CEO characteristics changed due to the 2008-2009 global financial crisis. The authors identify three fundamental success factors needed for companies to compete in the after-crisis environment, and the authors connect five CEO characteristics to such factors. The authors rely on a hand-collected database to build a panel data of European CEOs for the 2010-2012 period.
The empirical results indicate that after 2009, CEOs of companies that were more severely hit by the crisis are significantly different compared to those of other companies. More specifically, they have a background in science or engineering; they have international experience; and they are remunerated to a higher extent through stock options. The results of this paper also indicate that only international experience had a positive and significant impact on financial performance. The paper contributes to the stream of literature on CEO characteristics and owners’ identity, tackling the research theme from a dynamic rather than from a static perspective.
Read further at: Chiara Mio, Marco Fasan & Antonio Ros. 2016. Owners’ preferences for CEOs characteristics: did the world change after the global financial crisis?
Corporate Governance, 16(1), 116-134.
Corporate social responsibility or CEO narcissism and performance
This study builds on insights from both upper echelons and agency perspectives to examine the effects on corporate social responsibility (CSR) practices of CEO’s narcissism. Drawing on prior theory about CEO narcissism, the authors argue that CSR can be a response to leaders’ personal needs for attention and image reinforcement and hypothesise that CEO narcissism has positive effects on levels and profile of organisational CSR; additionally, CEO narcissism will reduce the effect of CSR on performance. The researchers find support for these ideas with a sample of Fortune 500 CEOs, operationalising CEO narcissism with a novel media-based measurement technique that uses third-party ratings of CEO characteristics with validated psychometric scales.
For more information, see: Petrenko, O. V., Aime, F., Ridge, J. and Hill, A. 2016. Corporate social responsibility or CEO narcissism? CSR motivations and organizational performance.
Strategic Management Journal, 37, 262–279.
Effects of unobservable CEO characteristics & compensation on firm social performance
Do unobservable CEO characteristics predict corporate social performance (CSP) and are they significantly correlated with CEO compensation? How meaningful is stock-based CEO compensation as a predictor of CSP? To answer these questions, the author empirically examines the relationship between stock-based CEO compensation and CSP while accounting for unobservable CEO characteristics.
This study finds that CEO fixed effects (CEO dummies) account for a significant variance in CSP and that these fixed effects are correlated with CEO compensation variables in a statistically significant manner. The findings suggest that unobservable CEO characteristics should be accounted for when examining the effect of CEO compensation variables on CSP. The findings also highlight the usefulness of stock-based compensation instruments for shareholders and other stakeholders who care about CSP and intend to promote CEO attention to social and ethical issues.
Read more at: Jingoo Kang. 2015. Unobservable CEO Characteristics and CEO Compensation as Correlated Determinants of CSP
Business & Society, first published on February 25, 2015
doi:10.1177/0007650314568862