The impact of CEO education on the investment attractiveness of companies

Abstract

Subject. The article considers the influence of CEO education on investment attractiveness of companies. Objectives. We focus on assessing the impact of CEO's level of education on company’s investment appeal. Methods. The empirical evidence contains observations on the 103 largest companies by capitalization from three macro regions: Russia, the USA, and Europe, for 2021. To test the stated hypotheses, we employ linear regression and neural network. The latter enables to build more complex (and hidden) dependencies due to multi-stage transformation of variables, and get a better predictive ability of the theoretical model on a test set than a classical linear regression. The outliers in the sample are replaced with typical values, using the k nearest neighbors method. To select the most significant independent variables in the dataset, we use a random forest algorithm that shows which variables should be included in the model. Results. The study confirmed that if Russian CEOs have an MBA degree, technical education and a degree from a prestigious American university, or technical education from European universities, this makes companies more attractive to investors. The findings serve not only as a theoretical basis for development of the agency theory of corporate finance and corporate governance, but also can be applied in practice by company shareholders to select CEOs. Conclusions. The analysis, involving the economic and mathematical methods and machine learning, demonstrated the dependence of the characteristics of CEO education on investment attractiveness of the world's largest corporations. Accordingly, shareholders need to pay special attention to the education of CEO candidates.