Does a Better Education Make For Better Managers? An Empirical Examination of CEO Educational Quality and Firm Performance

Abstract

This paper represents the first attempt, to our knowledge, to empirically examine the relationship between the quality of Chief Executive Officer (CEO) education and firm performance. This is an important question as many papers in the management literature have postulated that managers with higher educational attainment will be more adaptive and innovative, and more likely to possess other characteristics that may improve firm performance. We find four results in our analysis. First, using the mean entrance scores as proxies for the prestige of undergraduate and graduate programs, we find no evidence that firms with CEOs from more prestigious schools perform better than firms with CEOs from less prestigious schools. Second, we find that firms managed by CEOs with MBA or law degrees perform no better than firms with CEOs without graduate degrees. Third, we find some limited evidence that firms led by CEOs with non-MBA, non-law graduate degrees have slightly better risk-adjusted market performance than other firms. Fourth, we find that compensation is somewhat higher for CEOs who attended more prestigious schools.