CEO Learning Research Articles

Learning financial survival from disasters

This study examines how firms learn financial survival from experience, and how stock markets price this learning. We study American firms during the Covid turmoil which had prior exposure to the 2008 Global Financial Crisis. Our results show firms exposed to the 2008 Crisis had 95% higher monthly stock returns during Covid compared to their unexposed peers. This highlights the role major crises play in shaping organisational resilience. The organisational learning we illustrate includes a strong element of CEO learning but is not exclusive to senior management. Our empirical findings are stronger for firms in ‘shutdown sectors’ and persist after controlling for state interventions, as well as other control factors and estimation windows.

When CEOs adapt: An investigation of manager experience, policy and performance following recessions

We examine changes in corporate policies following recessions during CEO tenures to evaluate the value of learning. CEOs with recession experience demonstrate expertise in risk-shifting strategies that can contribute to higher firm value and performance during subsequent recessions. Specifically, Recession CEOs use conservative capital structure and allocation during expansions, providing excess capacity and financial slack to accumulate additional cash reserves during economic contractions, resulting in lower bankruptcy risk. As a result, Recession CEOs are equipped to raise more capital in recessions, which results in higher asset growth fueled by investments in acquisitions and capital expenditures. We also examine prior recessions and find poor performers learn to invest more and perform better in subsequent contractions. Our results are strengthened through cumulative recession experiences, when downturns are deeper, and at cyclical firms, where economic cycles are most impactful and Recession CEOs are more relevant. Finally, we use time-varying industry downturns, matching, and CEO turnovers for inference. Overall, we offer novel evidence of valuable CEO learning around risk-taking following direct managerial experience as a firm policy determinant across economic conditions.

CEO’s Industry Experience and Firm Performance: The Effects of Corruption and Political Uncertainty

We examine how CEO’s industry-specific experience influences firm performance in emerging markets. Drawing from upper echelons theory and a learning perspective, we argue that as CEOs accumulate industry-specific experience, they increase their understanding of the environmental dynamics within emerging markets, strengthen intra-industry connections to key suppliers, creditors, regulators, and influential resource networks that helps firms acquire and maintain access to critical resources. As such, firm performance should increase as its CEO gains industry knowledge. However, we also argue that as CEOs acquire industry-specific experience, they develop commitment to industry practices and the value of older knowledge gained from their early years in the industry decreases, hurting firm performance. Therefore, we posit that an inverted U-shaped relationship exists between CEOs’ industry-specific experience and firm performance. We also examine the effect of two important moderators in the context of emerging markets: corruption and political instability. We argue that the increased environmental uncertainty and complexity caused by corruption or political instability accelerate CEO learning effects making for greater performance gains and steeper performance declines with increasing CEO industry experience. We test our hypotheses using data from the World Bank’s Enterprise Survey of firms in emerging economies from 2006 to 2019 covering 143 countries. The results largely support our hypotheses. We conclude by discussing the implications of this research for CEO learning, CEO experience, and firms in lesser-developed institutional environments.

Practice makes perfect? The effect of CEO and director experience on acquisition performance

AbstractThis study replicates and extends the results of Field and Mkrtchyan, who find that independent directors’ prior acquisition experience improves succeeding acquisition performance. First, using both the original and an extended sample period, we confirm their findings. Second, we extend their study by considering the effect of prior acquisition experience gained by the CEO as an executive or independent director. Similar to the effect documented for independent directors, we find that CEOs’ acquisition experience is positively associated with subsequent acquisition performance. Consistent with CEO learning, we document a greater effect on subsequent takeover performance when acquisition experience is negative.

CEO learning goal orientation and firm innovation: Examining the CEO-TMT interface

Numerous studies have examined the effects of CEO characteristics on firm innovation, however, relatively few have explored CEO characteristics from the perspective of CEO learning goal orientation...

Does CEO Learning Improve Takeover Success?

CEO learning theory suggests that by completing more acquisitions and improving bidding skills, CEO has higher probability of succeeding in prospective transactions. In this paper, I examine the CEO’s learning process in acquisition programs. Empirical evidence indicates that CEO’s accumulated learning experience significantly increases the takeover likelihood of success. In addition, CEO pays higher premium to the target that has a lower risk of valuation, therefore increases the transaction success. I distinguish the effect of CEO learning from CEO’s inherent abilities by generating a proxy for competence as the success residual of the first transaction in acquisition programs. Probit regressions show that CEO competence causes the persistence of success in acquisition programs, but it does not affect the influence of CEO experience. I also confirm that CEO listens to the market reactions when making acquisition decisions, but the effect of learning during acquisition is lower when CEO is more experienced.

Does CEO Learning Improve Takeover Success?

Does CEO Learning Improve Takeover Success?

Human Resource Management Practices and Organizational Creativity: The Role of Chief Executive Officer's Learning Goal Orientation

We examined the role of the chief executive officer's (CEO) learning goal orientation in the relationship between human resource management (HRM) practices and organizational creativity in small- and medium-sized enterprises (SME). With data from 64 Korean SME from different respondents (CEOs and HRM managers), we examined the congruence of messages between formality represented by knowledge-sharing HRM practices and informality symbolized by the CEO's learning goal orientation in fostering organizational creativity. According to the analytical results, appraisal based on the extent of knowledge sharing enhanced organizational creativity when the CEO's learning goal orientation was high by sending congruent messages but not by monetary reward systems to promote knowledge sharing. The results have important theoretical and practical implications for the fit between formality/informality and organizational creativity in SME.

Position-specific knowledge, new CEO learning and firm performance

Building on organisational learning theory and CEO-strategy fit research, we introduce the concept of position-specific knowledge of a new CEO and explore its impact on the learning process that new CEOs go through after taking office and on firm performance during their early tenure. We empirically test this concept using a sample of 59 CEO succession events that occurred between 1987 and 2002 in 48 of the largest publicly listed companies in Germany. Results show that position-specific knowledge of new CEOs indeed has an influence on firm performance during the early tenure of a CEO. Thus, we conclude that organisational learning theory and position-specific knowledge of new CEOs offer a promising lens for executive succession research and that they deserve further attention.

Serial acquirer bidding: An empirical test of the learning hypothesis

Recent academic studies indicate that acquirers' cumulative abnormal returns (CAR) decline from deal to deal in acquisition programs. Does this pattern suggest hubristic CEO behaviors are significant enough to influence average CAR patterns during acquisition programs? An alternative explanation is CEO learning. This study therefore tests for learning using successive acquisitions of large U.S. public targets undertaken by U.S. acquirers. A dynamic framework reveals that both rational and hubristic CEOs take on average investor reactions to their previous deals into account and adjust their bidding behavior accordingly. These results are consistent with a learning hypothesis.

Serial Acquirer Bidding: An Empirical Test of the Learning Hypothesis

Recent academic studies indicate that acquirers’ cumulative abnormal returns (CAR) decline from deal to deal in acquisitions programs. Does this pattern suggest hubristic CEO behaviors are significant enough to influence average CAR patterns during acquisitions programs? An alternative explanation is CEO learning. This study therefore tests for learning using successive acquisitions of large U.S. public targets undertaken by U.S. acquirers. A dynamic framework reveals that both rational and hubristic CEOs take on average investor reactions to their previous deals into account and adjust their bidding behavior accordingly. These results are consistent with a learning hypothesis.

Nonprofit association CEOs how their context shapes what, how, and why they learn

AbstractThis qualitative study explored the learning experiences of twelve national nonprofit membership association CEOs using a phenomenological research design. While the professional context of an organization's chief executive is considered unique from other executive positions, the impact of this context on what and how CEOs learned was unclear. The findings describe association CEO learning as being affected in significant ways by the politically charged context in which the nonprofit association CEO operates with his or her board of directors. Power imbalances with staff and the board make learning through traditional organizational dialogue a less useful learning process for the CEOs. Furthermore, the feelings of isolation and vulnerability that are generated from the nonprofit association CEO context often cause CEOs to use private reflection and dialogue with their spouse as primary learning mechanisms. The study concludes that the association CEO context uniquely and profoundly shapes what, how, and why CEOs learn. Perhaps lacking the financial security of lucrative severance payments, which are often specified in employment contracts of for‐profit CEOs, the nonprofit association CEO will often temper his or her actions to avoid personal vulnerability with a politically charged board of directors.

How CEOs of Real Estate Companies Like to Learn

In the past ten years, many executive education programs have been developed at universities to assist leaders in learning new skills and proficiencies. However, there is little published literature that examines specifically how CEOs have learned needed new skills in the past or on the learning preferences of CEOs. This research examines how the CEOs of thirty-three real estate companies in the United States like to learn needed new skills and proficiencies and presents its findings as twelve CEO learning preference themes. It further compares these themes to the relevant literature distinguishing adult learning preferences (e.g., executives) from university undergraduate education, and reports on education techniques and methods favored by these CEOs compared to other adult learners.