Are young CEOs a better match for young firms? Evidence from age, firm performance and CEO compensation

Abstract

PurposeThe current paper extends previous studies on the match between CEO and firm and explores whether certain characteristics of young CEOs make them more desirable to young firms. Results in this paper will provide useful information to startup companies when they need to find managers leading the firms.Design/methodology/approachThis study use a large sample of panel regression to study the match between CEOs and firm via a difference-in-differences approach.FindingsThe author finds that young firms hire a disproportionately higher percentage of young CEOs than established firms. Young firms led by young CEOs exhibit higher growth rates in sales and assets and invest more in capital expenditure and R&D activities than similar firms led by older CEOs. Young CEOs in young firms also receive higher compensation than both older CEOs working in young firms and young CEOs working in established firms.Originality/valueThere are many studies examining how CEO age affect their decision-making process. There are also many studies examining the differences between young firms and established firms. However, there is no study so far examining the intersection of the two questions above. Specifically, whether the differences between young vs established firms make certain characteristics of young CEOs beneficial to young firms.