Chief Executive Officer Characteristics Research Articles

CEO Characteristics Enhancing the Impact of CEO Overconfidence on Firm Value After Mergers and Acquisitions — A Case Study in China

This study aims to explore whether various characteristics of chief executive officers (CEO) enhance the impact of CEO overconfidence on a firm’s value after mergers and acquisitions. The study finds that overconfident CEOs have a positive impact on firm value after mergers and acquisitions. The study also shows that overconfidence amongst CEOs can help to explain merger and acquisition decisions and the likelihood of pursuing acquisitions. Young CEOs were also found to significantly increase the impact of CEO overconfidence on a firm’s value after mergers and acquisitions, while female CEOs were found to be more risk averse when compared to their male peers, with lower leverage and less volatility in their firms when compared to firms run by male CEOs.

Economic policy uncertainty, CEO characteristics and firm R&D expenditure: a Bayesian analysis

ABSTRACT This paper applies a linear Bayesian regression model to study the effects of economic policy uncertainty (EPU) and Chief Executive Officer (CEO) characteristics on firm Research and Development (R&D) expenditure. We specifically analysed data from 1,163 Chinese companies listed as A-shares from 2008–2016. EPU is believed to curtail firm investments as it causes unexpected market conditions. Yet, our findings obtained with Bayesian analysis show a positive relationship between EPU and firm R&D expenditure. Specifically, we found that some CEO attributes (e.g., age, tenure and marketing/sales experience) led to a negative relationship between EPU and firm R&D expenditure, whereas other attributes (e.g., education, overseas study/work experience, product R&D experience, and process engineering experience) lead to a positive relationship. Our findings provide nuanced insights into how different CEO characteristics influence firms’ R&D expenditure in a context of uncertainty.

CEO financial background and internal control weaknesses

AbstractResearch question/issueThe existing literature documents that the functional expertise of Chief Executive Officers (CEOs) in finance reduces poor performance risk, improves financial reporting quality, and mitigates audit risk. In this study, we examine the association between CEOs' financial background and internal control weaknesses (ICWs).Research findings/insightsUsing a sample of Iranian listed companies for the period 2007–2017, we find a significant negative association between CEOs with financial expertise and ICWs. Furthermore, we show that the negative association between CEO financial expertise and ICWs is stronger if the CEO is recruited from inside the firm. Our main results are robust after controlling for the potential selection issue, random effects at the firm level, and the impact of the new Iranian internal control regulations. Moreover, our results remain unchanged after controlling for other CEO characteristics, audit committee characteristics, audit fees, and using an alternative measure of financial expertise.Theoretical/academic implicationsOur study contributes to the extant literature by examining the association between CEOs' financial background and ICWs, a theme that remains largely unexplored in previous research. We also extend the literature on CEO succession origin.Practitioner/policy implicationsThis study has important implications for regulators regarding the improvement of financial reporting quality and the effectiveness of internal controls, especially in the emerging markets. Particularly, our findings may be of benefit to auditors when assessing the risks regarding their clients' material weaknesses, as well as to shareholders and boards of directors when hiring a new CEO.

CEO characteristics and earnings management: empirical evidence from France

PurposeThe purpose of this paper is to investigate the impact of chief executive officer (CEO) characteristics on the earnings management examined by the discretionary accruals.Design/methodology/approachThe sample includes 151 French firms listed on the CAC ALL shares index from 2006 to 2015. The paper uses the feasible generalized least square regression technique to test the relationship between CEO characteristics and earnings management.FindingsUsing discretionary accruals as a proxy for earnings management, the results obtained from the three models (Jones modified 1995; Kothariet al., 2005; Raman and Shahrur, 2008) indicated that there is a positive and significant relationship between CEO duality, CEO nationality and the quality of financial communication. However, no significant relationship was found between CEO board member, CEO turnover and earnings management.Originality/valueA literature review finds that fewer studies have investigated the relationship between earnings management practices and personal CEO characteristics in the French context. Furthermore, no study yet has examined the influence of CEO nationality and CEO age on earnings management practices. This study provides empirical data about the impact of CEO’s characteristics on earnings management and how these different characteristics can facilitate the transition to manipulate and influence the quality of financial communication.

The hierarchical relationships between CEO characteristics, innovation strategy and firm performance in open innovation

Open innovation (OI) has become an important business norm of successful firms; however, its strategic aspects and the role of a key individual, such as a chief executive officer (CEO) in its adoption, have been under-researched. This paper aims to investigate whether OI is relevant to SMEs and how CEO characteristics influence firm performance through OI. The hierarchical relationships between a firm and CEO characteristics are analysed with structural equation modelling (SEM) using data from 401 innovation-oriented SMEs in Korea. The results indicate that: 1) openness can make a greater contribution to firm performance; 2) CEO characteristics are positively associated with openness; 3) government support positively influences both openness and internal R&D. The research suggests that the human elements in SMEs should place a greater emphasis on OI to enhance firm performance and that policy makers should consider developing various programs for key decision makers in SMEs to increase their awareness of OI.

Relationship between Chief Executive Officer characteristics and corporate environmental information disclosure in Thailand

This study focuses on the influence of Chief Executive Officer (CEO) characteristics on environmental information disclosure (EID) in the annual reports of companies listed on the Stock Exchange of Thailand. A regression analysis method is used to explore the relationship between CEO characteristics and corporate environmental disclosure. Pollution-intensive companies are taken as the samples in this study. Results show that financial expertise, educational level, and tenure of CEOs are positively correlated with corporate EID. By contrast, age or gender of CEOs is insignificantly related to EID.

Do CEO incentives and characteristics influence corporate social responsibility (CSR) and vice versa? A literature review

PurposeThis paper aims to analyze whether chief executive officer (CEO) incentives and characteristics (e.g. CEO power, CEO tenure) are linked with corporate social responsibility (CSR) and vice versa.Design/methodology/approachBased on upper echelons theory, the author conducts a structured literature review and evaluates 84 empirical-quantitative studies on CEO and CSR variables.FindingsWhile the majority of the included studies analyzed the CEO-CSR link, there are indicators for a bidirectional relationship. Moreover, prior research has focused on CEO incentives, especially compensation contracts, and on the US capital market. A major research gap relates to CEO characteristics, e.g. CEO values, education and experience.Research limitations/implicationsHeterogeneous CEO and CSR variables and endogeneity concerns lower the validity of recent studies. Future research is encouraged to implement dynamic regression models, increase CSR and CEO proxies and focus on international samples with country-specific effects.Practical implicationsAs CEO activities can have a major impact on CSR activities, the author recommends firms to search for opportunities to make their CSR strategy more comprehensive by their stakeholder communication, thus providing deeper insights into their CSR performance in line with stakeholders’ interests.Originality/valueThe paper is the first literature review on the interaction between CEO and CSR so far. The author explains the main CEO and CSR variables that have been included in research, stresses the limitations of the studies and gives useful recommendations for future research, practice and regulators.

The case for humble expectations: CEO humility and market performance

AbstractResearch SummaryIn this study, we investigate the effect of chief executive officer (CEO) humility on firm's market performance. We argue and find that firms with more humble CEOs will have better market performance but not because they actually perform better but, rather, because they benefit from an expectation discount in the market. Specifically, we show that, all else equal, financial analysts announce lower earnings per share expectations for firms with more humble CEOs. This expectation discount sets the stage for those firms to meet or beat analysts' expectations resulting in improved market performance for firms with humble CEOs. We find support for our ideas with a sample of Standard & Poor's (S&P) 500 CEOs, operationalizing CEO humility with a videometric technique.Managerial SummaryIn this study, we investigate the effect of CEO humility on firm's market performance. We show that firms with more humble CEOs will outperform other firms in the market because financial analysts tend to set lower market expectations for firms with more humble CEOs increasing the probability that they will outperform those expectations. Rather counterintuitively, these firms do not have better market performance because they perform better but because they face lower expectations. Ultimately, the study demonstrates the importance of CEO characteristics for external evaluations and perceptions about the firm with significant effects on investment performance.

Do CEO characteristics explain firm performance in India?

PurposeThe center of concern of this empirical paper is the connection between chief executive officer (CEO) characteristics and firm performance. The paper aims to discuss this issue.Design/methodology/approachThe paper inquires into the hypothesis on the relationship between CEO characteristics (demographic and professional) and accounting measures of firm value. The study is based on second-hand information comprising of Nifty 500 firms for a period of five years ranging from 2012 to 2016. Panel regressions are run on the final sample composed of 1,535 observations to test the hypothesized relationship.FindingsThe stated findings specify that long-tenured CEOs and firms led by female CEOs are negatively related to firm performance. Moreover, the authors find that the greater the CEO share ownership, higher the firm performance stands. Further, duality and foreign CEOs make a significant contribution when firm value is based on ROA. Results also show that CEO outside directorships have a noteworthy positive relationship with ROE.Research limitations/implicationsThe findings are limited to non-financial listed companies of the index. Future research can also experiment with financial and unlisted companies to have a different perspective.Practical implicationsThe study may provide worthwhile insights to shareholders as they largely seek to hire the most capable CEOs with the relevant combination of skills to achieve shareholders’ goals and improve the Indian competitive power in the global market.Originality/valueThis paper provides a comprehensive picture by inculcating different CEO traits especially in a progressing nation like India with a unique set of economic, political and cultural environment.

Are community health centers' chief executive officers' compensation related to clinical performance?

Most research of chief executive officer (CEO) compensation in the health care industry has been limited to hospitals. This study expands our knowledge of CEO compensation into the nonhospital areas of the industry, specifically community health centers (CHCs). CHCs are safety-net providers that are an integral part of the U.S. health delivery system for medically underserved populations. Since the passage of the Patient Protection and Affordable Care Act, the federal government has created financial incentives for CHCs to improve care through access and quality performance criteria. To promote quality improvement, CEOs need to set their organization's priorities. One method used to achieve this goal is to tie the CEO's compensation to the organization's quality performance. However, there is a gap in our knowledge if CHCs' CEOs compensation is associated with quality performance outcomes. The primary aim of this study was to examine the relationship between clinical performance and CEO compensation in CHCs. Agency, social comparison, and managerial power theories guided this research, which examines the relationship of clinical performance and CEO compensation. Secondary data on Uniform Data System's CHC clinical performance combined with CEO compensation from Internal Revenue Service Form 990 were analyzed using generalized estimating equations with state and year fixed effects on a national sample of section 330 grant-funded CHCs (N = 984) for the period 2011-2016. We found no evidence that clinical performance was associated with CHCs' CEO compensation. Except for race, all other CEO characteristics were positively associated with CEO compensation and in line with previous research. We found that non-White CEOs were compensated more than White CEOs. In addition, further subanalyses revealed that an increase in the highest paid employees' compensation was associated with an increase in CEO compensation. The findings of this study can assist Health Resources and Services Administration improve its assessment policies in funding allocation to CHCs, as well as help board members make informed decisions regarding tying CEO compensation to predetermined performance metrics.

Women at the helm: Chief executive officer gender and patient experience in the hospital industry.

Health care scholars have recognized the important role leaders play in the improvement of health care delivery systems, yet few have explored the kind of leaders who make a difference or the conditions under which certain health care executives thrive. Recent work in the hospital industry suggests that the role of chief executive officer (CEO) gender may be particularly salient in the context of patient experience (Galstian, Hearld, O'Connor, & Borkowski, 2018). In this article, we bring an explicit theoretical and empirical lens to the issue of CEO gender in the context of patient experience. Our framework provides an explanation of both why (differences between men and women in their tendency for relational orientation) and under what circumstances (the degree of complexity in the executive job environment) CEO gender is most influential. We test these relationships using data on patient experience in 391 nonrural U.S. hospitals between 2007 and 2011. Our study relies on both archival (e.g., Hospital Consumer Assessment of Healthcare Providers and Systems survey) and collected (e.g., CEO characteristics) data. Fixed-effects regression models are used to estimate the relationship between CEO gender and the interpersonal care experience. We find evidence that female CEOs improve the interpersonal care experience faster than male CEOs, particularly in the most complex executive job environments, that is, in the most populous urban environments, and in the largest hospital facilities. Our results not only support the notion that executives tend to rely on personal values and preferences but also that women have an apparent propensity for transforming health care organizations in the direction of patient centeredness, particularly in the most demanding circumstances. Hospital boards seeking to improve the patient experience should give careful attention to promoting women to the role of CEO and consider how their own policies may be constraining both the promotion of female executives and the creation of more patient-centered health care organizations.

CEOs’ Characteristics and Firm Performance: A Study of Indian Firms

The centre of interest of this research article is the association between chief executive officer (CEO) characteristics and firm performance. Employing a sample of Nifty 500 firms, the support found recommends that demographic and job-related characteristics may be related with the firm’s financial performance. We consider CEO gender, duality, nationality, remuneration and education level as CEO characteristics and we employ return on assets (ROA) as a representative for firm performance. This study widens the understanding of the important function played by the CEO and provides better insight into CEO-specific variables. Specifically, the reported findings specify a positive relationship between CEO remuneration and firm performance, thus indicating that compensation acts as a good inducement for executives to yield finer firm performance while CEO nationality appears to inhibit it, steering foreign directors to a minority spot. This implies that remuneration should be more thoughtfully attached to performance, so that proficient CEOs are not lured by more tempted compensation elsewhere and the decision to engage foreign nationals to company boards must be based on norms other than the firm’s future financial performance.

The relationships between CEO characteristics and strategic risk-taking in family firms

We examine the influences of chief executive officer (CEO) personal characteristics on family firms’ strategic risk-taking. Building on upper echelons theory, we investigate the influences of CEO family relationships, the CEO professional education, other career experiences, tenure, and career horizon have on the risk level a company takes. By analyzing a sample of 107 Italian family firms listed on the Milan Stock Exchange, we find that company’s risk-taking significantly and negatively relates to CEO family relationship and professional education, but positively to CEO career horizon. This provides support to the argument that such CEO personal characteristics are key factors in explaining differences in risk-taking among family firms. Further, our analysis of control variables shows that family firms’ risk-taking relates positively to board size and negatively to company size. These results suggest that company and board characteristics also significantly influence the risk levels taken by a company.

Influence of CEO Age and CEO Founding Experience on Myopic Management at Initial Public Offerings

This study investigates the effects of key characteristics of the chief executive officer (CEO) on a firm’s decision to engage in myopic earnings inflation around its initial public offering (IPO). Increasing short-term profitability through unjustified budget cuts, known as myopic management, is proven to have a negative net effect on firm performance in the long run. However, literature yielded scarce results on driving factors of the phenomenon. Building on upper-echelons perspective and agency theory, we employ a sample of 247 firms going public in the U.S. between 2004-2013 with 741 firm-year observations. We hypothesize and find evidence for a positive association of CEO age and a negative association of CEO founding experience with myopic management around IPOs. We also examine the moderating influence of whether the CEO simultaneously functions as chairman, and discuss the ambiguous results. Our manifold contributions to research include shedding light onto organizational antecedents of the harmful practice of myopic management. We also advance IPO literature by providing knowledge on the influence of CEO characteristics on IPO strategies.

Exploring Twitter for CSR Disclosure: Influence of CEO and Firm Characteristics in Latin American Companies

Social networks, which are characterised by accessibility and interactivity, offer great potential for dialogue between companies and stakeholders, for example as platforms for publishing information on aspects of corporate social responsibility (CSR). In this paper, we use a synthetic index to analyse levels of CSR disclosure via Twitter, and identify explanatory variables of this disclosure by studying the demographic characteristics of the Chief Executive Officer (CEO) and of the company. This synthetic index was based on data for 93 companies located in the four countries of the Pacific Alliance (Chile, Colombia, Mexico, and Peru), using categories based on the 2016 Global Reporting Initave (GRI) Standards. The tweets were compiled during a period of two months in 2017, immediately before and after the publication of each CSR report. The synthetic index was taken as the dependent variable and used as the basis for multivariate regression analysis to identify the relationship between the level of CSR disclosure on Twitter and the characteristics of the firm and its CEO. The results obtained show that firms operating in environmentally-sensitive industries present higher levels of CSR disclosure on Twitter than those in other sectors. By country of origin, the Colombian and Chilean companies offered higher levels of disclosure than those in Mexico and Peru. The regression analysis revealed a positive relationship between the firm operating in a sensitive industry and its level of CSR disclosure on Twitter, and an inverse relationship between the latter variable and the tenure of the CEO.

The relationship between CEO personal power, CEO competencies, and company performance

This article examines the impact of chief executive officer (CEO) power (formal and informal) on company performance and investigates the relationship between the CEO’s power and the company’s financial performance: share price performance, return on assets (ROA), and Tobin’s Q. The research employed both primary and secondary data. A questionnaire collected data from 391 professionals (respondents) in the market and comprised two scales, one adapted from existing research on personal competencies of directors and the second on CEO personal power dimension and demographics. Seven hypotheses were tested. Seven were supported for share price performance, four for ROA and three for Tobin’s Q. The CEO’s is a key role in general management, probably the most important. This is the only study found in the extant literature, which investigates the links between CEO power, competencies, and company performance. It identifies some of the most important characteristics of the effective CEO.

Does family involvement monitor external CEOs’ investment decisions?

This paper examines two closely related issues: first, the impact of a professional chief executive officer (CEO) on family investment decisions; and second, how the organizational context (family involvement and board effectiveness) interacts with the external CEO risk-bearing attitude to affect investment intensity in family firms. Using a sample composed of 103 family firms from 13 countries for the period 2008–2015, our results support the negative impact of non-family CEOs on family investment levels, especially when they are of longer tenure. However, our results note that family involvement moderates CEO risk aversion propensity, increasing the levels of investment needed to preserve socioemotional and financial goals in family firms. Therefore, this paper extends the knowledge on the determinants of investment intensity in family firms by simultaneously considering non-family CEO characteristics as well as the organizational context variables of family firms.

Female CEOs and Core Earnings Quality: New Evidence on the Ethics Versus Risk-Aversion Puzzle

The question of whether females tend to act more ethically or risk-averse compared to males is an interesting ethical puzzle. Using a large sample of US firms over the 1992–2014 period, we investigate the effect that the gender of a chief executive officer (CEO) has on earnings management using classification shifting. We find that the pre-Sarbanes–Oxley (SOX) Act period was characterized by high levels of classification shifting by both female and male CEOs, but the magnitude of such practices is, surprisingly, significantly higher in firms with female CEOs than in those with male CEOs. By contrast, our results suggest that following the passage of the punitive SOX Act, classification shifting by female CEOs declined significantly, whilst it remained pervasive in firms with male CEOs. This suggests that the observable differences in financial reporting behavior between male and female CEOs seem to be because female CEOs are more risk-averse, but not necessarily more ethically sensitive than their male counterparts are. The central tenets of our findings remain unchanged after several additional checks, including controlling for alternative earnings management techniques, corporate governance mechanisms, CEO and chief financial officer characteristics and propensity score-matching.

The Impact of CEO Characteristics on the Internationalization of SMEs: Evidence from the UK

AbstractThis study analyses the role of chief executive officers (CEOs) in the internationalization of small‐ and medium‐sized enterprises (SMEs). Specifically, it examines the impact of CEOs' demographic characteristics on the internationalization of SMEs. Based on upper echelons theory, resource‐based view and information processing theory, it is hypothesized that CEO characteristics like age, education, tenure, and political connectedness affect SMEs' international performance. Using the panel data analysis of 283 UK SMEs for the period of 2005 to 2015, this study provides evidence that CEOs' political connections and educational level are positively related to firm internationalization, while age negatively influences firm internationalization. Tenure is found to have a curvilinear relationship with SMEs' internationalization. Copyright © 2018 ASAC. Published by John Wiley & Sons, Ltd.

CEO characteristics and corporate philanthropic giving in an emerging market: The case of China

The upper echelons theory proposes that organizational actions may reflect the values, experiences, and personalities of powerful actors within an organization. Drawing upon this theory, this research investigates how the characteristics of chief executive officers (CEOs) affect corporate philanthropic giving (CPG) strategies in an emerging market. Using a unique data set consisting of CPG activities of publicly listed Chinese firms in response to the 2008 Wenchuan earthquake, this study uncovers relationships between CEOs' acquired characteristics (e.g., tenure, education, political connectedness, celebrity status) and different aspects of firm CPG strategies, including donation amount, timeliness and disclosure. We discuss the unique insights we gain by studying the upper echelons theory and corporate philanthropic giving in an emerging market context.