CEO Age Research Articles

CEO decision horizon and corporate R&D investments: an explanation based on managerial myopia and risk aversion

AbstractCombining the views of managerial myopia and risk aversion, we argue that a short decision horizon could divert corporate investments away from R&D investments. We devise an industry‐adjusted measurement combining CEO’s expected tenure and age as a proxy for CEO decision horizon and find a positive relationship between the horizon and corporate R&D investments. The relationship is stronger among firms with lower industry‐level income volatility and lower firm‐level performance pressure. The results also show that CEO age is more important than CEO tenure in affecting the decision horizon. Further analyses indicate that risk aversion determines the studied relationship.

Do CEO characteristics influence a firm’s investment in brand equity? Evidence from Chinese listed firms

This paper contributes to the upper-echelons theory by extending the investigation of how CEO characteristics, namely gender, age, tenure, education attainment, and duality, influence firms’ strategic decisions regarding brand equity investment. We gather 8830 firm-year observations from the Chinese listed firms for the period of 2012 to 2018. We develop several hypotheses and use a probit regression specification to test each hypothesis. The empirical results show that a CEO’s tenure and duality have a positive influence. Interestingly, the CEO’s age has a negative influence while their gender and education have no significant influence on a firm’s propensity to invest in brand equity. It indicates that longer tenures and duality lead CEOs to be confident making them more willing to invest in high-risk projects. It also indicates that older CEO’s are risk-averse, while gender does not play a role in the risk-taking appetite of the CEO. The results provide several implications for firms looking to develop influential brands, especially in China.

Media Coverage, CEO Age and Corporate Performance in Big Data Environment

This study analyzes the influence of CEO age on corporate performance under the big data environment and the role of media coverage in this relationship by taking the A-share listed companies from 2009 to 2019 as research objects. Our results show that in the low-speed developing enterprises, the older the CEO, the higher the level of corporate performance. Positive and neutral media reports positively affect corporate performance, whereas negative media reports negatively affect corporate performance. Media reports (including positive, negative, and neutral media reports) weaken the influence of CEO age on corporate performance

The Effect of Board Governance and CEO Attributes Towards Corporate Performance of Malaysian Public Listed Financial Companies

This paper investigates the relationship between corporate governance, CEO attributes and firm performance of public listed financial companies in Malaysia from 2008 to 2017. There are several theories employed in the studies whereby the agency theory and resource dependency theory suggest that the board size have a positive impact on firm performance. In contrast, stewardship theory suggests smaller board size positively impacts the firm performance and prospect theory suggested that every person perceives and values gains and losses differently, and this affects the decision making. The firm performance has been measured using the return on equity (ROE) and return on assets (ROA). The data of the variables of board size, board independence, board meeting, CEO duality, CEO age and CEO gender are manually obtained from the annual reports, while the financial data include firm performance, capital expenditure and leverage are obtained from the Thomson Reuters Datastream. The research method employed in this study is the panel regression analysis. The findings of this study suggest that there is a positive and significant relationship between board size and firm performance and a positive and significant relationship between board independence and firm performance. Meanwhile, board meeting is found to have mix relationship with the firm performance. Furthermore, our result also shows CEO age and male CEO exhibit positive impact on firm performance.

The Market Success of Corporate Spin-offs: Do CEO External Directorships, Age, and Their Interactions Matter?

Corporate spin-offs have been a major “preferred” restructuring technique in the previous couple decades in the U.S. This corporate transaction aims to create value for both divesting firm and its subsidiary. This study examines an understudied interaction of CEO external directorships and age (as well as their direct effects) in the strategy literature on the change in market valuation of spun-off subsidiaries. By drawing our cases from the SDC Platinum database, we identified 138 completed corporate U.S. spin-offs that took place between 2000 and 2014. Our empirical analysis indicates that the number of CEO external directorships as well as having a younger CEO positively and significantly affect the change in market valuation. In addition, our interaction effect shows significant results. Grounded in the upper echelons and resource dependence theories, this study contributes to the corporate governance literature in terms of understanding whether two particular CEO characteristics and their interactions hold a great deal of importance for spun-off subsidiaries’ market performance. From the perspective of managerial implications, this study suggests that having a younger CEO along with holding many external directorships will help these spun-off subsidiaries much better perform in the market.

Determinant Factors of Bank Financial Reporting Quality; Study at Regional Development Banks in Sumatra

This study examined the simultaneous influence of performance credibility, go-public companies, company director with adequate auditing experience, age of CEO, material weakness disclosure, changes in public accountant, connection between CEO with the government, and Good Corporate Governance on the quality of financial reporting of Regional Development Banks in Sumatera. This study also analyzed the partial influences of Independent variables on the quality of financial statements of Regional Development Banks in Sumatera, and determined the variable with the strongest influence on the quality of financial statements of regional banks in Sumatera. Secondary data were analyzed using logistic regression tests. Sample in this study is all of Regional Development Banks in Sumatera. The hypotheses of this study consist of three types of tests; Simultaneous Significance Test (F test), Individual Parameter Significance Test (T-test), and Coefficient Determination Test (R2). The results of the data analysis showed that : the first, performance credibility, go-public companies, company director with adequate auditing experience, age of CEO, changes in public accountant, connection between CEO with the government, ,material weakness disclosures, and Good Corporate Governance simultaneously affected the quality of financial statements reporting at regional banks in Sumatera. Secondly, material weakness disclosures and Good Corporate Governance had partial influence on the quality of the financial reporting, Meanwhile, performance credibility, go-public companies, directors with auditing experience, age of CEO, changes in public accountant, and the connection between CEO with the government had not partial influence on the quality of the financial reporting. Third, All variable was found influence significance (65%) on the quality of financial reporting of regional banks in Sumatera. Keywords: Good corporate governance, public accountant and quality of financial statements DOI: 10.7176/RJFA/11-17-19 Publication date: October 31 st 2020

Capital budgeting practices: evidence from Korea

PurposeThe authors present the results of a survey on how Korean firms evaluate new projects and estimate their capital costs. The authors report how Korean firms’ capital budgeting practices compare to other developed countries and to best practices in the field of finance.Design/methodology/approachThe authors survey CFOs of major Korean firms on their capital budgeting practices. The authors then compare the results against the US and European firms and best practices of leading firms and financial advisors.FindingsThe authors find that the capital budgeting practices of Korean firms are as strong as or stronger than firms in developed markets. A majority of Korean firms use best practices techniques such as NPV, IRR and the CAPM for project evaluation and cost of equity estimation. Chaebol affiliation results in somewhat stronger capital budgeting practices. The authors also find that other factors, such as company size, leverage, CEO age and CEO education, impact capital budgeting practices.Originality/valueThis paper is the first article that comprehensively examines Korean firms' capital budgeting practices.

Effect of Chief Executive Officer’s Characteristics on Capital Structure of Publicly Listed Firms in Kenya

Based on a panel of publicly listed firms in Kenya over the period of 2008 to 2014, we examined if Chief Executive Officer’s Characteristics affects capital structure. CEO tenure, CEO gender and CEO age and CEO education were used as independent variables while the capital structure was used as the dependent variable of the study. The study used upper echelon theory, trade-off theory and agency theory. Majorly, descriptive statistics, Pearson correlation analysis and panel regressions were performed. Panel regression analysis was used to determine the effect of CEO characteristics on capital structure. CEO tenure had a negative and significant effect on capital structure, CEO age had a positive and significant effect on the capital structure, CEO gender and CEO education indicated a negative and significant effect on capital structure respectively. The study indicates that there is an association between CEO characteristics and capital structure of listed firms in Kenya. It is therefore instrumental for firms to appoint their CEOs based on the duration they have served the company, CEOs to sit in their position for a longer period of time and those who have the requisite knowledge and experience hence they can be tasked with making important decisions pertaining firms' financing. Keywords: capital structure, CEO characteristics, Upper Echelon Theory, Trade-Off Theory, panel data and Agency Theory DOI: 10.7176/RJFA/11-18-07 Publication date: September 30 th 2020

Impact of CEO characteristics on firm performance: evidence from China listed firms

ABSTRACT This paper investigates the influence of CEO characteristics on firm performance. Our sample data consists of 10,446 observations from Chinese listed companies taken during the period 2008–2016. After applying a Quantile Regression approach, we find that CEO age has no obvious impact on firm performance, a finding that clearly differs from previous research. CEO tenure only has a highly significant negative impact on high valuation firms (at the 75th and 90th). Furthermore, while CEO political ties are positively related to low valuation firms, the exact opposite effect is evidenced in relation to high-performance firms.

CEO age and risk-taking of family business in Malaysia: The inverse S-curve relationship

The relationship between CEO age and corporate risk-taking has remained inconclusive after decades of research. This study contends that CEO may have different risk-taking propensities at different age stages and the relationship could be better captured by nonlinear function. Using a large sample of 6169 firm-year observations of public listed companies in Malaysia, we study the risk-taking behaviour of CEO for the period of 2009 to 2017. We find that CEO age has an inverse U-shaped relationship, such that risk-taking increases with CEO age but reduces beyond certain age threshold. Besides, drawing on socioemotional wealth perspective, we further examine the moderating effect of family CEO. We find that near-retirement family CEO reverses the conservative behaviour at old age and results an inverse S-curved relationship. Findings of this paper yields implication for family business and policymakers seeking to encourage risk-taking behaviour in emerging countries.

Contemplating the Impact of the Moderators Agency Cost and Number of Supervisors on Corporate Sustainability Under the Aegis of a Cognitive CEO.

The social cognitive theory emphasizes the risk-taking behavior of an entrepreneur, which leads him to make the right decisions. In this regard, this study formulates the concept of the cognitive CEO through the DAE statistical technique. Specifically, CEO attributes such as CEO age, CEO compensation, CEO tenure, goodwill, and the number of CEO-attended meetings are used as inputs that influence the intangible assets, the output. Chinese SMEs have been selected for empirical analysis for the years 2014–2018. The empirical results reveal that having a cognitive CEO augmented corporate sustainability, while agency cost and the number of supervisors strongly diminished corporate sustainability. Meanwhile, high earnings per share and high total assets are vehicles for maintaining the sustainable growth of firms. Additionally, it is indicated that firms with a loan burden cannot maintain sustainable corporate growth. Lastly, the execution of 2SLS and GMM instrumental regressions authenticate the veracity of results.

How the CEO power and age dissimilarity shape the chair-CEO pay gap: Empirical evidence from China

Using data on China’s listed firms from 2009 to 2018, this paper investigates how the chair-CEO age dissimilarity and CEO power affect the chair-CEO pay gap from both managerial power theory and optimal contract theory. We find that CEO power and age dissimilarity have opposite effects on pay gap between the chairman and the CEO. And the cognitive conflict caused by age dissimilarity can effectively restrain the compensation-seeking behavior of CEO for non-performance compensation growth. More importantly, both the age difference and its sign have important value. When we consider age dissimilarity between the CEO and the entire board of directors, our hypotheses are still confirmed. Finally, we document that both CEO ability and co-working time between chairman and CEO could reduce the inhibition effect of age dissimilarity on compensation incentive from capability and relationship view. Overall, the results are beneficial to reform the top managers’ compensation incentive system and to improve the explicit and implicit supervision mechanisms.

CEO gender and managerial entrenchment

This paper investigates the effect of gender on managerial authority and control over firms. The study examines S&P 1500 firms for the period of 1999–2014. Our findings suggest that accounting performance, firm value, CEO age, firm age, and board size reduce the likelihood of appointing female managers. On the other hand, the appointment of female CEOs is directly associated with the percentage of female directors, board independence, and beta. The study confirms the notion that female CEO appointments are generally associated with firms facing adverse conditions, and shows that female CEOs are more entrenched as compared to male CEOs. We find that the presence of female CEO decreases the turnover-performance sensitivity, increases the E-index, and inflates CEO compensation. Our research suggests that the level of female CEOs’ entrenchment provides them with greater job security, higher level of control, and inflated pay that compensate the risk of accepting the appointment in a high risk and poor performing firm.

Investors’ Valuations of Female CEOs: Risk Management Performance and Information Asymmetry

This paper examines the relationship between female CEOs’ risk management and earnings performance, considering that risk involves a corresponding proportionate return. We find that female CEOs have a positive relationship with the quality of internal control but a negative relationship with profitability during the 2007-2009 financial crisis, which means that the tradeoff between risk and return occurs in a crisis. Nevertheless, female CEOs show no significant relationship with company value. This finding suggests that the tradeoff between risk and return causes offset effects on the firm value during a crisis. We further investigate whether risk-related motivations influence female CEOs’ risk management performance. We set CEOs’ company-related wealth as a risk-taking motivation, and CEO age and high share ownership as risk-averse motivations. In conclusion, risk-related motivations do not advance risk management performance. This finding calls into question the argument of some literature that women's risk management ability stems from their risk-averse tendency. Notably, the risk-taking motivation positively relates to return of asset and company value, but has a negative effect on company value during a crisis. Moreover, it undermines female CEOs’ risk management during a crisis and dilutes the risk-return tradeoff.

CEO Age and Firm Innovation: Evidence from IT Industry in Korea

This paper investigates the relationship between CEO age and firm innovation measured as innovation productivity (i.e., the number of patent applications) and innovation scope (i.e., technological proximity). Using a sample of 11,194 firm-year observations from the Korean stock markets for the sample period of 2002−2016, we document that a firm’s innovation productivity or innovation scope decreases in CEO age. We also report that younger CEOs in IT firms are more likely to participate in firm innovation than those in non-IT firms. Our main results are robust in Tobit, Poisson, and negative binomial regressions, in specification of CEO-fixed effect models, and in estimating new sample constructed by a propensity score matching. Taken together, younger CEOs in IT firms may be more motivated to signal their innovativeness to the market to be regarded as outstanding innovators or adventurous innovators, which supports managerial signaling hypothesis for young CEOs.

Eyes on the prize: CEO and director retirement preferences and acquisitions

AbstractWe examine whether the age of CEOs and independent directors impacts the likelihood of receiving a successful takeover offer. First, we replicate and confirm the results of Jenter and Lewellen and find that retirement age CEOs (age 64–66) are more likely to receive successful takeover offers. Second, we extend their study by investigating the retirement preferences of independent directors. We find that the likelihood of receiving a successful takeover offer increases when a higher proportion of independent directors are at retirement age. This finding suggests that independent directors have similar retirement preferences to CEOs.

Demonstrating the Impact of Cognitive CEO on Firms' Performance and CSR Activity.

One aspect of entrepreneurship psychology also clarifies individual characteristics. Drawing from entrepreneurship psychology, the concept of a cognitive CEO has been formulated using the DAE statistical technique. The study elucidates that cognitive CEOs not only boost SME performance but also invigorate CSR activity. Data for listed SMEs for the years 2016–2018 are analyzed through the panel regression technique. Significantly, the study demonstrates that CEO age is positively interlinked with the growth and CSR activity of the firm. Moreover, the empirical underpinning of the results also reveals that state-owned enterprises and firms with high total assets prefer cognitive CEOs, who accelerate the firm’s value and invigorate CSR activity. The number of independent directors is analyzed as a moderator and is concluded to be an intensifier for both SME growth and CSR activity. Finally, 2SLS instrumental panel regression is used to validate the veracity of the empirical results.

A temporal perspective on the relationship between top management team internationalization and firms' innovativeness

This study examines whether top management team (TMT) internationalization is positively related to firm innovativeness. Besides focusing on the accumulation of top managers' international knowledge and capabilities, we explore the influence of moderators reflecting temporal concerns at three levels: CEO age, TMT tenure, and firm age. Combining upper echelons theory with innovation literature and using a sample of large stock‐listed German firms, we demonstrate that TMT internationalization can increase firm innovativeness. This relationship is context‐dependent on the age of the CEO. Overall, this paper sheds light on the antecedents of firm innovativeness and the consequences of increasingly international TMTs.

Does CEO Age Matters? : A Case of an Emerging Economy.

In today’s business environments, “Does CEO age matters?” still have doubts due to multiple pros and cons associated with the age. Where CEO age has been noted as an influencing element on firm performance. The intervening mechanism that governs direct and indirect effect of CEO age on performance via CEO tenure has remained limited and under researched in the markets of emerging economies. Specifically, test models of this paper suggest that CEO Tenure indirectly influences performance through its direct effect on the link between CEO Age and performance. Results from regression and pairwise correlation analysis confirms the study hypothesis and are consistent with model. In discussion this study traces the implication of results for practice and future research.

ASEAN countries CG disclosure practices: a comparative analysis of one-tier and two-tier board structures

Study focal point is to access the influence of CEO characteristics and audit quality on disclosure quality in the comparison between one-tier and two-tier board structures. Tobit regression model with the random effect is used to access influence on disclosure quality by using the sample of 200 non-financial firms of Indonesia, Malaysia, Thailand, and Singapore for the period from FY 2011 to FY 2015. The study empirically analyses the various characteristics of one and two-tier board structures. Findings of the study observe CEO dual role inversely and audit committee expertise directly impact disclosure quality for both structures. Further, observed audit committee size and firm size directly impact disclosure quality for one-tier structure and CEO age and leverage inversely impact two-tier structure. Finally, CEO tenure, audit quality and audit committee independence having no impact on disclosure quality for both board structure.